March 31, 2015 the 30 ment ubilee Feed and Company buys on ble are readed Pollow note of disco (thousands of wings) ASSETS on term, or 1/10 net 10, but it has not been taking paying in 60 rather than 10 day. Asume that the accounts teme not net of discounts Jubilee's Accounts receivable Inventory Total Current Assets Kh.6.000 Property, plant and Equipment Total Assets Kshs. Kahe LIABILITIES EQUITY Kshs 5,000 500 Kshs sod Accounts payable 4,500 Notes payable 500 7.500 Accruals 17,500 Total Current Liabilities 1,500 7.500 Long-term debt 12.500 20.000 Shareholders' equity 20,000 Total Liabilities & Equity hent unless the company begins making ays or less). The firm can borrow on a 1-year note ating balance needed for transactions; it cannot be used as part of Now, Jubilee's supplies are threatening prompt payments that is paying in 1 days or less. The firm (call this a current liability) from its bank at ating ba required. (Jubilee's kshs 500.000of cash is needed for transactions ability) from its bank at a rate of 15%, with a 20% con the compensating balance) Required: a) How large would the accounts payable balance be if Jubilee takes disc not take discounts and pays in 30 days. b) How large must the bank loan be if Juba BC must the bank loan be if Jubilee takes discounts? If Jubilee doesn't take discounts? (5 marks) unts payable balance be if Jubilee takes discounts If it does (10 marks) c) Assume that Jubilee foregoes the discount and borrows the amount needed to become current on its payables. Constant a Proforma statement of financial position based on decision. (5 marks) d) Now assume that the Kshs 5,000,000 shows on the statement of financial position is recorded net of discounts. How much would Jubilee have to pay its suppliers to reduce its accounts payable to Kshs.2,500,000? If Jubilee's tax rate is 30%,what is the effect on its net income due to the lost discount when it reduces its accounts payable to Kshs.2,500,000?How much would Jubilee have to borrow? (5 marks)
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