Which financing cycle scenario is a reasonable description of the following conceptual model?
A) A short-term line of credit at a local bank is established so that each time the enterprise's checking account balance is less than $100, cash of $1,000 is automatically deposited into the account. Repayment of each $1,000 transfer is due within 30 days, with an interest rate of 8%. The line of credit is a commitment event, the cash deposit is both an economic increment event and a commitment event. Repayment of the line of credit is an economic decrement event.
B) An enterprise offers installment sales whereby the customer pays for merchandise over the course of six months. The sale contract is a commitment event, the customer statements sent each month are commitment events, the cash receipts from the customer are economic increment events and the sale of the merchandise is an economic decrement event.
C) An enterprise borrows $20,000 cash and uses it to purchase land. The promissory note terms require the principal and interest to be repaid monthly according to an amortization schedule that reflects 8% interest. The loan is a commitment event, the receipt of the $20,000 cash is an economic increment event, the monthly payment of interest is a commitment event, and the monthly payment of principal is an economic decrement event.
D) An enterprise sells 10,000 shares of its own common stock for $350,000. A year later, the enterprise declares dividends of $2 per share for a total of $20,000. The stock issuance is a commitment event, the cash receipt is an economic increment event, the dividend declaration is a commitment event, and the dividend payment is an economic decrement event.
E) An enterprise accepts merchandise from individuals on consignment and displays that merchandise in its storefront. When the merchandise is sold, the enterprise keeps 20% of the selling price and remits 80% of the proceeds to the merchandise owner. The consignment agreement is a commitment event, the sale is a commitment event, the cash receipt is an economic increment event and the cash disbursement is an economic decrement event.

Question

Which financing cycle scenario is a reasonable description of the following conceptual model? 
A) A short-term line of credit at a local bank is established so that each time the enterprise's checking account balance is less than $100, cash of $1,000 is automatically deposited into the account. Repayment of each $1,000 transfer is due within 30 days, with an interest rate of 8%. The line of credit is a commitment event, the cash deposit is both an economic increment event and a commitment event. Repayment of the line of credit is an economic decrement event. 
B) An enterprise offers installment sales whereby the customer pays for merchandise over the course of six months. The sale contract is a commitment event, the customer statements sent each month are commitment events, the cash receipts from the customer are economic increment events and the sale of the merchandise is an economic decrement event. 
C) An enterprise borrows $20,000 cash and uses it to purchase land. The promissory note terms require the principal and interest to be repaid monthly according to an amortization schedule that reflects 8% interest. The loan is a commitment event, the receipt of the $20,000 cash is an economic increment event, the monthly payment of interest is a commitment event, and the monthly payment of principal is an economic decrement event. 
D) An enterprise sells 10,000 shares of its own common stock for $350,000. A year later, the enterprise declares dividends of $2 per share for a total of $20,000. The stock issuance is a commitment event, the cash receipt is an economic increment event, the dividend declaration is a commitment event, and the dividend payment is an economic decrement event. 
E) An enterprise accepts merchandise from individuals on consignment and displays that merchandise in its storefront. When the merchandise is sold, the enterprise keeps 20% of the selling price and remits 80% of the proceeds to the merchandise owner. The consignment agreement is a commitment event, the sale is a commitment event, the cash receipt is an economic increment event and the cash disbursement is an economic decrement event.

Quizplus · Accepted Answer

The Answer of Which financing cycle scenario is a reasonable description of the following conceptual model? 
A) A short-term line of credit at a local bank is established so that each time the enterprise's checking account balance is less than $100, cash of $1,000 is automatically deposited into the account. Repayment of each $1,000 transfer is due within 30 days, with an interest rate of 8%. The line of credit is a commitment event, the cash deposit is both an economic increment event and a commitment event. Repayment of the line of credit is an economic decrement event. 
B) An enterprise offers installment sales whereby the customer pays for merchandise over the course of six months. The sale contract is a commitment event, the customer statements sent each month are commitment events, the cash receipts from the customer are economic increment events and the sale of the merchandise is an economic decrement event. 
C) An enterprise borrows $20,000 cash and uses it to purchase land. The promissory note terms require the principal and interest to be repaid monthly according to an amortization schedule that reflects 8% interest. The loan is a commitment event, the receipt of the $20,000 cash is an economic increment event, the monthly payment of interest is a commitment event, and the monthly payment of principal is an economic decrement event. 
D) An enterprise sells 10,000 shares of its own common stock for $350,000. A year later, the enterprise declares dividends of $2 per share for a total of $20,000. The stock issuance is a commitment event, the cash receipt is an economic increment event, the dividend declaration is a commitment event, and the dividend payment is an economic decrement event. 
E) An enterprise accepts merchandise from individuals on consignment and displays that merchandise in its storefront. When the merchandise is sold, the enterprise keeps 20% of the selling price and remits 80% of the proceeds to the merchandise owner. The consignment agreement is a commitment event, the sale is a commitment event, the cash receipt is an economic increment event and the cash disbursement is an economic decrement event.

Which Financing Cycle Scenario Is a Reasonable Description of the Following