Chapter 10: Q11DQ (page 473)
Question: What is the issue price of a \(2,000 bond sold at ? What is the issue price of a \)6,000 bond sold at ?
Answer
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Enviro Company issues 8%, 10-year bonds with a par value of $250,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 5%, which implies a selling price of 1233⁄8. The straight-line method is used to allocate interest expense.
1. What are the issuer’s cash proceeds from issuance of these bonds?
2. What total amount of bond interest expense will be recognized over the life of these bonds?
3. What is the amount of bond interest expense recorded on the first interest payment date?
Question: Refer to the statement of cash flows for Samsung in Appendix A. For the year ended December 31, 2015, what was the amount for repayment of long-term borrowings and debenture
Refer to the bond details in Problem 10-4B.
Required
Indicate whether the company in each separate case 1 through 3 has entered into an operating lease or acapital lease.
1. The lessor retains title to the asset, and the lease term is three years on an asset that has a five-year useful life.
2. The title is transferred to the lessee, the lessee can purchase the asset for $1 at the end of the lease, and the lease term is five years. The leased asset has an expected useful life of six years.
3. The present value of the lease payments is 95% of the leased asset’s market value, and the lease term is 70% of the leased asset’s useful life.
Santana Rey has consulted with her local banker and is considering financing an expansion of her business by obtaining a long-term bank loan. Selected account balances at March 31, 2018, forBusinessSolutionsfollow.
Total assets . \(120,268 Total liabilities . \)875 Total equity $119,393
Required
1.The bank has offered a long-term secured note to Business Solutions. The bank’s loan procedures require that a client’s debt-to-equity ratio not exceed 0.8. As of March 31, 2018, what is the maximumamount that Business Solutions could borrow from this bank (rounded to the nearest dollar)?
2.If Business Solutions borrows the maximum amount allowed from the bank, what percentage of assets would be financed (a) by debt and (b) by equity?
3.What are some factors Santana Rey should consider before borrowing the funds?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
