On 1/1, $400,000 of specific accounts receivable of Annie's Animal Shop are assigned as collateral on a loan with the Bank. Annie's Animal Shop and the Bank both agreed to the following estimates: Sales discounts: $10,000, Sales returns $21,000, and Credit Loss: $19,000. The loan is due in 5 years and has an interest rate of 10%. The finance charge is 1%. a) How would Annie's Animal Shop be affected? b) How would the Bank be affected?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 30P
icon
Related questions
Question

B1.

 

On 1/1, $400,000 of specific
accounts receivable of Annie's
Animal Shop are assigned as
collateral on a loan with the Bank.
Annie's Animal Shop and the Bank
both agreed to the following
estimates: Sales discounts:
$10,000, Sales returns $21,000,
and Credit Loss: $19,000. The loan
is due in 5 years and has an
interest rate of 10%. The finance
charge is 1%.
a) How would Annie's Animal
Shop be affected?
b) How would the Bank be
affected?
Transcribed Image Text:On 1/1, $400,000 of specific accounts receivable of Annie's Animal Shop are assigned as collateral on a loan with the Bank. Annie's Animal Shop and the Bank both agreed to the following estimates: Sales discounts: $10,000, Sales returns $21,000, and Credit Loss: $19,000. The loan is due in 5 years and has an interest rate of 10%. The finance charge is 1%. a) How would Annie's Animal Shop be affected? b) How would the Bank be affected?
Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT