EDCI 1000 Lecture : EDCI Notes

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azuremammoth471

15 Mar 2019

School

LSU

Department

Curriculum & Instruction

Course

EDCI 1000

Professor

All

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Document Summary

Account balance: a dollar amount that includes ant unpaid balance, new purchases, and cash advances finance charges, and fees. Annual fee: the yearly cost that some companies charge for owning a card. Annual percentage rate (apr): the amount of interest charged on your unpaid balance, meaning the cost of credit if you carry a balance in any given month. The higher the apr, the more you pay in finance charges. Available credit: the unused portion of your credit line updated monthly on your bill. Cash advance: an immediate loan, in the form of cash, from the credit card company. You are charged interest and may also pay a separate transaction fee. Credit limit: the debit ceiling the card company places on your account. Delinquent account: an account that is not paid on time or for which the minimum payment has not been met.

Related Questions

Use two decimal places in your answers ( please show work )

1. A firm plans to issue $5,000,000 of commercial paper for 30 days. A dealer will issue the paper at $4,985,000 at a fee of $2,000 in advance. What is the effective annual rate?

2. A firm has agreed to borrow $750,000 at a simple interest rate of 6% for 30 days to meet its short-term funding needs. The bank charges a loan processing fee of $1,000. What is the effective annual rate on this loan?

3. Assume a trade creditor offers you terms of 2/10 net 40. a. What is the effective annual cost of forgoing the discount? b. If the firm=s bank charges 14% on loans, would you take the trade credit discount?

4. A firm has established a revolving line of credit for $900,000 with a bank at a rate of prime plus 2%. There is an annual fee of 1/2% on any unused funds. Interest is discounted on loans. Prime was 5% when the agreement was made. Assume the firm decides to take down the line for $500,000 for 60 days when the prime is at 6%. What is the effective annual rate?

5. A firm has $500,000 in accounts receivable. A commercial bank will accept these accounts receivable as collateral and will advance the firm 75% of the accounts receivable amount on loan at 6%. The bank charges a $5,000 credit checking fee. The firm will use the agreement for 90 days. What is the effective annual rate?

6. A firm needs full use of $2,000,000 to purchase a new machine. A bank has agreed to loan at 9% discounted interest for 180 days. The bank requires a .25% compensating balance. The bank charges fees in advance of $300. a. How much will the firm need to borrow? b. What will be the effective annual rate on the loan?

7. A firm has $900,000 in inventory qualifying for a short-term loan with a warehouse receipt. A commercial bank will accept this warehousing agreement and inventory as collateral and will advance 80% of the value of the inventory on loan at 6%. The bank charges $5,000 upfront for the agreement. The firm will use the borrowing for 60 days. What is the effective annual rate on the borrowing?

1.Federal Deposit Insurance coverage on a single account in a single institution was set at this maximum insurable amount. A) 1,500,000 B) 1,000,000 C) 500,000 D) 250,000 E) 100,000

2.Federal Deposit Insurance coverage on a joint account in a single institution was set at this maximum insurable amount. A) 1,500,000 B) 1,000,000 C) 500,000 D) 250,000 E) 100,000.

3.If you had a 300,000 joint account with a relative in the FDIC insured Merchants Bank, and a second joint account with the same relative in the FDIC Insured Farmers Bank, then how much of your savings would be covered. A) 150,000 B) 300,000 C) 500,000 D) 600,000

4.If you had a 540,000 joint account with a relative in an FDIC insured financial institution, how much of your savings would not be covered. A) 40,000 B) 20,000 C) 250,000 D) 270,000

5.Under the Federal Truth-in-Savings Act, Banks must use a standard ______________ formula when stating the interest paid; which makes it easier for consumers to compare banks offerings. A) APR B) ROI C) APY D) CPI E) None of the above

6.The Savings Act also requires disclosure of _____________________ on any statements provided to customers. A) fees B) APY earned C) both of the above D) None of the above

7.Money Market Mutual Funds (MMMFs) pay earnings to investors/depositors interest rates based on __________. (A) Treasury yields ( B) Prime (C) Libor ( D) Market interest rates

8.Money Market Deposit Accounts at ____________________________ are federally insured. A) Investment companies B) Banks C) Banks & Investment companies D) Banks & Credit Unions

9.You can make arrangements with the bank to pay a check that overdraws your account, this is. A) Withholding B) Reconciling C) Stopping Payment D) Overdraft Protection E) Compounding

10In order to correct a billing error you must notify the creditor in writing _________ days after the bill was mailed. A) ten B) twenty C) thirty D) sixty

11.Once you have notified a creditor of a billing error, they can give damaging information to other ___________ . (A) Creditors; (B) Credit bureaus; (C) both A & B; (D) none of the above

12.Under the new Federal Reserve rules of 2010, the credit card company must notify you _______ days before they can increase your rate or other fees. A) 30, B) 45, C) 60, D) 90.

13.Under the new Federal Reserve rules beginning in Feb. 2010, the credit card company must notify you ___ days before they can make significant changes to the terms of your credit card. A) 30, B) 45, C) 60, D) 90.

14.Your rates can be increased without advanced notice if, _______________________________. (A) the index tied to your variable rate goes up; (B) your introductory rate expires and reverts to the âgo toâ rate; (C) you havenât made your payments as agreed; (D) All of the above

15.The Fair Debt Collection Practices Act prohibits _______________________________ practices. A) abusive, B) deceptive, C) unfair, D) all of the above

16.Medium-priced loans typically cost _______ %. A)5 to 7; B) 6 to 8; C) 9 to 12; D) 8 ti0 20.

17.Expensive loans typically cost _______ %. A)5 to 7; B) 6 to 8; C) 8 to 20; D) 20 to 50.

18.Before the financial crisis of 2008, unethical predatory lending practices exploit __________. A) lower-income borrowers, B) Minority borrowers, C) elderly homeowners, D) all of the above

19.The ____________ favors lenders and dictates that you pay more interest at the beginning of the loan. A) rule of 72; B) rule of 78s; C) rule of the digits; D) catch 22.

20.The new Credit CARD law requires creditors to include a warning in their monthly statements that warn them that paying the minimum due you will ________________________________. A) pay more interest; B) take longer to pay off the balance; C) Both A & B; D) None of the above

21.The Truth in Lending Law requires your creditor disclose whether you are entitled to a ______ of the finance charge if you pay off the loan early. A) discount; B) refund; C) rebate; D) recredit.

22.The Credit Card Act of 2009, amongst other things, limits card issuerâ ability to increase the APR on transferred balances during the __________________ that the credit card account is open. A) first year; B) for 2 years; C) for 5 years; D) during the life of the loan.

23.The Credit Card Act of 2009, amongst other things, restricts the penalties that card issuers can charge for _____________. (A) early payment; (B) going over the credit limit; (C) late payment; D) all of the above.

24.The Credit Card Act of 2009, amongst other things, requires all teaser rates to stay in effect for at least ___ months. A) 6; B) 9; C) 12; D) 18; E) 24.

25.The Credit Card Act of 2009, amongst other things, sets a _________ due date for card payments each month. A) Early B) extended C) consistent D) flexible

26.The Credit Card Act of 2009, amongst other things, restricts card issuers from applying new (higher) interest rates to the ÂÂÂ________ ÂÂÂÂÂÂcard balances. A) remaining, B) existing, C) undisclosed D) all of the above

27.Debt collection agencies cannot contact before ___ a.m. in the morning. A) 6; B) 7; C) 8; D) 9.

28.Debt collection agencies cannot state that you will be ___________ if you do not pay the debt. A) sued in civil court; B) sued for bankruptcy; C) arrested; D) all of the above

29.Debt collection agencies cannot state they are taking legal action if they _________________. A) havenât probable cause; B) donât intend to; C) havenât done due diligence; D) all of the above

30.Debt collection agencies cannot contact you after ______ p.m. A) 7; B) 8; C) 9; D) 10.

bronzeoyster264

FNEC 1600

Comprehensive Problem â Due Date: December 1, 2017

Fall 2017

Your score on the following problem will carry a weight of 13% in determining your overall course grade. A hard copy of your solution must be submitted by December 1^st. Any submission after the beginning of class on that date is subject to a 10 point per day late point reduction.

Description:

You have been charged with preparing year-end adjusting entries along with a multiple-step income statement and a classified balance sheet for Fat Tire, Inc., a wholesaler of bicycles and bicycle parts. The financial statements will cover the year ended December 31, 2016. A December 31 bank reconciliation, an unadjusted trial balance, and other information to help with the adjusting entries follow.

Fat Tire, Inc.
Bank Reconciliation
31-Dec-16
Balance per Bank Statement				$297,000
Deposits in Transit		$4,500
Bank Error (See note 1 below)		1,200
Outstanding Checks		(2,000)		3,700
Adjusted Balance				$300,700

Balance per Fat Tire's Books				$300,000
Interest Earned per bank statement		$450
Book Error (See note 2 below)		1,170
NSF Check (See note 3 below)		(500)
December bank service charges		(420)		700
Adjusted Balance				$300,700

*note 1:* The bank incorrectly charged Fat Tire's account for a fee
that belonged to another client of the bank.
*note 2:* A check for $130 to pay a cash miscellaneous operating
expense was incorrectly recorded as $1,300 on Fat Tire's books.
*note 3:* The bank returned a bad check deposited by Fat Tire
that represented a receipt of payment from one of Fat Tire's
customers.
Fat Tire, Inc.
Unadjusted Trial Balance
December 31, 2016
	Debit		Credit
Accounts Payable			50,000
Accounts Receivable	425,700
Accumulated Depreciation (Equip)			4,305
Accumulated Depreciation (F & F)			23,600
Advertising Expense	18,000
Allowance for Doubtful Accounts			$1,500
Cash	$300,000
Common Stock			180,000
Cost of Goods Sold	2,613,000
Depreciation Expense	6,455
Equipment	10,000
Furniture & Fixtures	50,000
Income Tax Expense	228,323
Insurance Expense	7,500
Interest Revenue			5,200
Inventory	325,000
Miscellaneous Operating Expense	2,500
Note Payable			35,000
Payroll Tax Expense	23,680
Prepaid Insurance	10,500
Rent Expense	168,000
Rent Revenue			4,000
Retained Earnings			242,553
Salary Expense	264,500
Sales Discounts	42,000
Sales Returns	30,000
Sales Revenue			4,020,000
Supplies	2,000
Supplies Expense	17,000
Unearned Rent			2,000
Utilities Expense	24,000
Totals	4,568,158		4,568,158

Information related to adjusting entries:

No entries have been made for the December 31 bank reconciliation. Use the bank reconciliation provided to prepare the necessary entries.

Fat Tire pays employees and all payroll related liabilities semi-monthly. Each payment of payroll related liabilities is for the previous pay period. Thus, Fat Tire needs to accrue salaries and payroll related expenses for the December 16^th-31^st pay period. The following information was obtained for the last pay period of the year.

Gross Pay = $12,000
Federal Income Tax withholding rate = 20%
FICA rate for employees and employers = 8%
State unemployment taxes for the pay period = $250
Federal unemployment taxes for the pay period = $75

Fat Tire maintains a liability account for federal income tax withheld from employees and a separate liability account for its own corporate income taxes.

Based on a count taken on December 31^st, the amount of supplies that remain on hand is $500.

Unbilled sales as of December 31 totaled $5,000. The cost of those bikes sold was $2,000.

The Allowance for Doubtful accounts is adjusted at the end of each year using the percentage of sales method. Fat Tires estimates that 1% of adjusted net sales will go uncollected.

The Prepaid Insurance balance represents an $18,000 one-year policy that began on July 1. The company adjusts any prepaid items on a monthly basis.

Fat Tire decided to sublease some of its rental space. On October 1, the company received $6,000 in advance from a neighboring business for 3 monthâs rent. The lease period began on October 1. Fat Tire adjusts rent related accounts on a monthly basis.

Furniture and Fixtures were acquired on January 2, 2012 at a cost of $50,000. Management selected a 10 year life and a $2,000 residual value. Fat Tire depreciates Furniture and Fixtures on a monthly basis using the straight-line method of depreciation.

The Equipment was purchased on January 2, 2015 at a cost of $10,000. Management selected a productive life of 6,000 hours and a $1,000 residual value. Fat Tire depreciates Equipment on a monthly basis using the units-of-production method. The equipment was used 200 hours in December.

The Note Payable was issued on December 1, 2016. The terms of the note state that the principal and interest is to be paid two years from the issuance date. The interest rate stated on the note is 6 percent.

Accrued advertising expenses incurred but not yet paid totaled $1,000 on December 31.

Fat Tire makes quarterly payments for its income taxes. No entry has been made for the fourth quarter income taxes of 2016 which will be paid in 2017. To make this entry, you will have to determine the Income Before Tax for the year. One-fourth of that amount represents income earned in the fourth quarter. Fat Tireâs corporate tax rate is 40%.

Required:

Prepared the adjusting journal entries required on December 31, 2016.

Prepared a multiple-step income statement for the year ended December 31, 2016. Make sure your operating expenses are listed in descending order. Use the Income statement example that I provided as supplemental notes to chapter 6 as a guide.

Prepare a classified balance sheet as of December 31, 2016. List your current assets in order of liquidity.

Note: If it helps, prepare a supplemental schedule like we completed in problem 4.6A. It may help organize your data prior to preparing the financial statements.

Appropriate Use of Office Hours:

Office hours are held so that students can ask questions about assignments and/or concepts. For assignments that are to be submitted for a grade, it is unreasonable for you to ask âis my assignment correctâ or âcan you find my mistakesâ. That is why the assignments are graded. A reasonable request is to ask âhow toâ questions if you are stuck on a step or âcan you help me understand this data or this requirementâ. We (Iâm speaking for the TAs as well) want to help, but we are not there to complete your assignments for you.

Print Formats: Be sure to use the print preview feature in Excel and adjust your spreadsheets so that they can be easily read. Points will be deducted if I have to work just to read your printouts. Use normal size fonts and make sure that when reading left to right, you do not have sheets starting on one page and finishing on another. In other words, pretend Iâm your client.

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EDCI 1000 Lecture : EDCI Notes

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