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AICPA Exam CPA-Business Topic 1 Question 35 Discussion
Topic #: 1
Kemple Cleaning Services is a newly established janitorial firm, and the owner is deciding which type of checking account to open. Kemple is planning to keep a $500 minimum balance in the account for emergencies and plans to write an average of 80 checks per month. The bank charges $10 per month plus a $0.10 per check charge for a standard business checking account with no minimum balance.
Kemple also has the option of a premium business checking account, which requires a $2,500 minimum balance but has no monthly fees or per check charges. If Kemple's cost of funds is 10 percent, which account should Kemple choose?
Choice 'd' is correct. The total cost for a standard account is:
Cost per year for premium is cost of the extra amount ($2,000) that Kemple must maintain in the account.
Total per year premium (10% $2,000) = $200
The premium account will save $16.
Choices 'a', 'b', and 'c' are incorrect, per the above calculation.
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