Deal of The Day! Hurry Up, Grab the Special Discount - Save 25% - Ends In 00:00:00 Coupon code: SAVE25
Welcome to Pass4Success

- Free Preparation Discussions
Mail Us support@pass4success.com
Location US
Mob_nav_barsMENU

AICPA CPA-Business Exam - Topic 3 Question 32 Discussion

Corbin Inc. can issue three-month commercial paper with a face value of $1,000,000 for $980,000. Transaction costs would be $1,200. The effective annualized percentage cost of the financing, based on a 360-day year, would be:
C) 8.65%
A) 2.16%
B) 8.48%
D) 8.00%

AICPA CPA-Business Exam - Topic 3 Question 32 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 32
Topic #: 3
[All CPA-Business Questions]

Corbin Inc. can issue three-month commercial paper with a face value of $1,000,000 for $980,000. Transaction costs would be $1,200. The effective annualized percentage cost of the financing, based on a 360-day year, would be:

Show Suggested Answer Hide Answer
Suggested Answer: C

Choice 'c' is correct. The cost to issue the commercial paper is the $20,000 original issue discount ($1 million - $980,000), plus transaction costs of $1,200 for a total of $21,200. Therefore, it costs $21,200 to borrow $980,000 for 3 months. The 3-month interest cost is 2.16% ($21,200 / $980,000).

The annual interest cost is 8.65%

Choices 'a', 'b', and 'd' are incorrect, per the above calculation.


by Thaddeus at May 07, 2022, 12:13 AM

Limited Time Offer

25%

Off

Get Premium CPA-Business Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

0/2000 characters
Submit Cancel
Mignon
11 months ago
8.48% seems like a solid guess based on the numbers!
upvoted 0 times
...
Colene
11 months ago
Wait, how can the cost be that high? Sounds off.
upvoted 0 times
...
Olga
11 months ago
I'm leaning towards option C, seems right.
upvoted 0 times
...
Armanda
11 months ago
I think the transaction costs really add up here!
upvoted 0 times
...
Winfred
12 months ago
The face value is $1,000,000, and they issue it for $980,000.
upvoted 0 times
...
Kiley
12 months ago
This seems like a tricky situation. I'll need to think carefully about the privacy and professional implications before responding.
upvoted 0 times
...
Filiberto
12 months ago
Okay, I remember from the course materials that the Implement stage is about actually putting the SIAM model into practice, so I'm guessing the answer is C - managing the day-to-day service delivery.
upvoted 0 times
...
Paola
12 months ago
This seems like a straightforward question about the purpose of an audit checklist. I'll carefully read through the options and choose the one that best describes the main function.
upvoted 0 times
...
Michel
12 months ago
Key tip: Always look for multi-layered oversight in compliance questions. The cross-checking aspect in A suggests it's likely the right approach.
upvoted 0 times
...

Save Cancel