[jeff]

Post by Another71.

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Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Anonymous]

seriously, i dont think anything stuck from chapter 6 for me . Im gonna look at it again later in the week but focus my efforts on the first 5 chapters for now.

[Anonymous]

seriously, i dont think anything stuck from chapter 6 for me . Im gonna look at it again later in the week but focus my efforts on the first 5 chapters for now.

[Anonymous]

seriously, i dont think anything stuck from chapter 6 for me . Im gonna look at it again later in the week but focus my efforts on the first 5 chapters for now.

[Anonymous]

A hospital is comparing last year's emergency rescue services expenditures to those from 10 years ago. Last year's expenditures were $100,500. Ten years ago, the expenditures were $72,800. The CPI for last year is 168.5 as compared to 121.3 ten years ago. After adjusting for inflation, what percentage change occurred in expenditures for emergency rescue services?

a. 18.1%

b. 0.06%

c. 38.0%

d. 13.8%

[Anonymous]

I'm not sure how to do this.

I think I can calculate the inflation rate.

=((168.5-121.3)/ 121.3) * 100

= 38.911

Then what?

[Anonymous]

A company obtained a short-term bank loan of $500,000 at an annual interest rate of eight percent. As a condition of the loan, the company is required to maintain a compensating balance of $100,000 in its checking account. The checking account earns interest at an annual rate of three percent. Ordinarily, the company maintains a balance of $50,000 in its account for transaction purposes. What is the effective interest rate of the loan?

a. 7.77 percent.

b. 8.56 percent.

c. 9.44 percent.

d. 8.50 percent.

[Anonymous]

@DoOver — (D)?

Although I'm not too confident in my answer.

[Anonymous]

Its B.

I couldn't get it either.

=(500,000 * .08) – (50,000 *.03) / 500,000-50,000

= 38500/450000

= .085555

I guess it makes sense. But it was not intuitive for me at all.

The numerator is the interest on the loan, minus the interest gained on 50k in the savings account.

The denominator is the amount you can use from the loan.

I'm not sure why you wouldn't use the interest gained on the entire 100K to reduce your interest expense. But thats not even an answer choice. I get the denominator, but the numerator is tricky.

[Anonymous]

Honestly, when I get questions like this I just shake my head and move on. I learned a long time ago if you get bent out of shape from not knowing how to do one certain calc or struggle with a particular concept you'll drive yourself crazy. I try to have a decent grasp on all topics. Whatever that means.

[Anonymous]

Can someone help me with this? I know the answer but I dont get the explanation

Spotech Co.’s budgeted sales and budgeted cost of sales for the coming year are $212,000,000 and $132,500,000 respectively. Short-term interest rates are expected to be 5%. Assume that all inventory must be financed with short-term debt. If Spotech could increase inventory turnover from its current 8 times per year to 10 times per year, its expected interest cost savings in the current year would be:

A) $165,625

B) $0

C) $331,250

D) $81,812

[Mystro]

Hi dsch9319,

Hope the below help.

COGS Inventory turnover Average inventory

132,500,000 ÷ 8 16562500

132,500,000 ÷ 10 13250000

3312500 inventory decrease

* 5% Interest rate

---

$165,625 Cost saving

Regards,

[Anonymous]

thanks. but why is it coming year cost of sales divided by 8?

[mtwst113]

@dsch9319 – dividing the 132,500,000 by 8 gives you the amount of sales that would be financed through short term debt, given an inventory turnover of 8, which allows you to compare this amount against the amount calculated using an inventory of 10 to figure out the savings (before interest).

BEC | √
AUD| √
FAR| Spring 2015

[Anonymous]

@dsch. Whats up with that cpi question? How do you do it?

[Anonymous]

Hey DoOver, the becker answer is really confusing but i found this great explanation on another thread:

first you need to calculate the percentage difference between current CPI and 10-years-ago CPI: (168.5-121.3)/121.3 = 38.91%

Then you adjust 10-years-ago expenditure to today's value ($72.800*(1+38.91%))= $101,126.48

Now you can compare apples to apples. 10-years-ago expenditure (101,126.48) vs today's expenditure (100,500). That is a decrese of 0.6%

Hope it helps!

[Author]

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