You have the following information for Duggan Inc . liabilities at fiscal year e
ID: 2559733 • Letter: Y
Question
You have the following information for Duggan Inc. liabilities at fiscal year end Dec. 31, 2017 reported (in $ thousands).
($ 000’s)
($ 000’s)
Accounts payable
$ 74,639
Long-term debt*
$ 560,000
Accrued liabilities
18,850
Unearned revenue
60,475
Payroll tax expense
1,566
Dividends payable
10,480
Income taxes payable
25,427
Accumulated Depreciation
122,184
Notes Payable, 3-month
145,065
Interest Payable
20,350
Other Information
* Long-term debt is the balance of a 6-year, 4.5% p.a. installment loan. Duggan Incborrowed $840 million on March 30, 2015. Equal installments and interest are due annually on April 1 each year.
A)
i) Prepare the Liabilities Section of Duggan Inc. 's Statement of Financial Position/Balance Sheet.
ii) How much of the total interest payable ($20,350) relates to the installment loan, above?
B) Operating Line of Credit:
i) What is an Operating Line of Credit? Briefly explain how it benefits a firm.
ii) How does a firm account for an Operating Line of Credit?
iii) Why is information about a firms’ Line of Credit important to investors?
($ 000’s)
($ 000’s)
Accounts payable
$ 74,639
Long-term debt*
$ 560,000
Accrued liabilities
18,850
Unearned revenue
60,475
Payroll tax expense
1,566
Dividends payable
10,480
Income taxes payable
25,427
Accumulated Depreciation
122,184
Notes Payable, 3-month
145,065
Interest Payable
20,350
Other Information
* Long-term debt is the balance of a 6-year, 4.5% p.a. installment loan. Duggan Incborrowed $840 million on March 30, 2015. Equal installments and interest are due annually on April 1 each year.
Explanation / Answer
balance sheet
Liabilities
current liabilties
Accounts payable
$ 74,639
Accrued liabilities
18,850
Income taxes payable
25,427
Notes Payable, 3-month
145,065
Unearned revenue
60,475
Dividends payable
10,480
Interest Payable
20,350
total of current liabilities
355286
long term debt
560000
total of liabilities
840647
total amount of interest
20250
interest on long term debt
(560000*4.5%*9)/12
18900
B-
An operating line of credit allows you to overcome short-term cash flow problems. The operating lines allow you to take money out on an as-needed basis. The line of credit is open up to a set amount, or your credit limit. It helps to manage short term liquidity problem.
2-A business line of credit is a financial instrument typically used for an organization's short-term working capital needs, such as inventory purchases, future project costs, or company payroll. Lines of credit are mainly to help even out your cash flow.
3-This information is important to investors to know about the liquidity position of the company and sources of funds available to meet the liquidity problem.
balance sheet
Liabilities
current liabilties
Accounts payable
$ 74,639
Accrued liabilities
18,850
Income taxes payable
25,427
Notes Payable, 3-month
145,065
Unearned revenue
60,475
Dividends payable
10,480
Interest Payable
20,350
total of current liabilities
355286
long term debt
560000
total of liabilities
840647
total amount of interest
20250
interest on long term debt
(560000*4.5%*9)/12
18900
B-
An operating line of credit allows you to overcome short-term cash flow problems. The operating lines allow you to take money out on an as-needed basis. The line of credit is open up to a set amount, or your credit limit. It helps to manage short term liquidity problem.
2-A business line of credit is a financial instrument typically used for an organization's short-term working capital needs, such as inventory purchases, future project costs, or company payroll. Lines of credit are mainly to help even out your cash flow.
3-This information is important to investors to know about the liquidity position of the company and sources of funds available to meet the liquidity problem.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.