{"id":111619,"date":"2023-01-04T12:09:25","date_gmt":"2023-01-04T12:09:25","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/union-company-is-considering-establishment-of-a-zero-balance-account\/"},"modified":"2023-01-04T12:09:25","modified_gmt":"2023-01-04T12:09:25","slug":"union-company-is-considering-establishment-of-a-zero-balance-account","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/union-company-is-considering-establishment-of-a-zero-balance-account\/","title":{"rendered":"Union company is considering establishment of a zero-balance account."},"content":{"rendered":"<div>\n<p><strong>14-9 Accounts receivable changes with bad debts<\/strong><\/p>\n<p>A firm is evaluating an accounts receivable change that would increase bad debts from 2% to 4% of sales. Sales are currently 50,000 units, the selling price is $20 per unit, and the variable cost per unit is $15. As a result of the proposed change, sales are forecast to increase to 60,000 units.<\/p>\n<p><strong>a. <\/strong>What are bad debts in dollars currently and under the proposed change?<\/p>\n<p><strong>b. <\/strong>Calculate the <em>cost of the marginal bad debts <\/em>to the firm.<\/p>\n<p><strong>c. <\/strong>Ignoring the additional profit contribution from increased sales, if the proposed change saves $3,500 and causes no change in the average investment in accounts receivable, would you recommend it? Explain.<\/p>\n<p><strong>d. <\/strong>Considering <em>all <\/em>changes in costs and benefits, would you recommend the proposed change? Explain.<\/p>\n<p><strong>e. <\/strong>Compare and discuss your answers in parts <strong>c <\/strong>and <strong>d.<\/strong><\/p>\n<p><strong>14-16 Zero-balance account <\/strong>Union Company is considering establishment of a zero-balance account. The firm currently maintains an average balance of $420,000 in its disbursement account. As compensation to the bank for maintaining the zero-balance account, the firm will have to pay a monthly fee of $1,000 and maintain a $300,000 non\u2013interest-earning deposit in the bank. The firm currently has no other deposits in the bank. Evaluate the proposed zero-balance account, and make a recommendation to the firm, assuming that it has a 12% opportunity cost.<\/p>\n<p><strong>15-9<\/strong><br \/>Cost of bank loan Data Back-Up Systems has obtained a $10,000, 90-day bank loan at an annual interest rate of 15%, payable at maturity. (Note: Assume a 365-day year.)<\/p>\n<p>a. How much interest (in dollars) will the firm pay on the 90-day loan?<\/p>\n<p>b. Find the effective 90-day rate on the loan.<\/p>\n<p>c. Annualize your result in part b to find the effective annual rate for this loan, assuming that it is rolled over every 90 days throughout the year under the same terms and circumstances.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>14-9 Accounts receivable changes with bad debts A firm is evaluating an accounts receivable change that would increase bad debts from 2% to 4% of sales. Sales are currently 50,000 units, the selling price is $20 per unit, and the variable cost per unit is $15. As a result of the proposed change, sales are [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[],"class_list":["post-111619","post","type-post","status-publish","format-standard","hentry","category-education"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/111619","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=111619"}],"version-history":[{"count":0,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/111619\/revisions"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=111619"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=111619"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=111619"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}