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Chapter 10: Q16DQ (page 473)

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

Short Answer

Expert verified

Answer

Amount of repayment equals KRW 1,801,465 million.

Step by step solution

01

Long term borrowing explanation

Long terms borrowings includes debentures, bonds payable, long term debt or loan etc. These are generally paid after one year.

02

Decrease in Samsung’s long-term borrowings

As per the Cash Flow statement under Financing activities, Repayment of long-term borrowings and debentures equals (1,801,465) (In millions of Korean won)

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Most popular questions from this chapter

Refer to the bond details in Problem10-2A, except assume that the bonds are issued at a price of $4,895,980.

Required

  1. Prepare the January 1, 2017, journal entry to record the bonds’ issuance.
  2. For each semiannual period, compute (a) the cash payment, (b) the straight-line premium amortization, and (c) the bond interest expense.
  3. Determine the total bond interest expense to be recognized over the bonds’ life.
  4. Prepare the first two years of an amortization table like Exhibit 10.11 using the straight-line method.
  5. Prepare the journal entries to record the first two interest payments.

Ripkin Company issues 9%, five-year bonds dated January 1, 2017, with a \(320,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of \)332,988. Their annual market rate is 8% on the issue date.

Required

1.Calculate the total bond interest expense over the bonds’ life.

2.Prepare a straight-line amortization table like Exhibit 10.11 for the bonds’ life.

3. Prepare the journal entries to record the first two interest payments

Heineken N.V. reports the following information for its loans and borrowings as of December 31, 2015, including proceeds and repayments for the year ended December 31, 2015 (euros in millions).

Loans and borrowings (noncurrent liabilities)

Loans and borrowings, December 31, 2015

€ 10,658

Proceeds (cash) from issuances of loans and borrowings

1,888

Repayments (in cash) of loans and borrowings

(1,753)

  1. Prepare Heineken’s journal entry to record its cash proceeds from issuances of its loans and borrowings for 2015. Assume that the par value of these issuances is €1,900.
  2. Prepare Heineken’s journal entry to record its cash repayments of its loans and borrowings for 2015. Assume that the par value of these issuances is €1,700, and the premium on them is €24.
  3. Compute the discount or premium on its loans and borrowings as of December 31, 2015, assuming that the par value of these liabilities is €10,000.
  4. Given the facts in part 3 and viewing the entirety of loans and borrowings as one issuance, was the contract rate on these loans and borrowings higher or lower than the market rate at the time of issuance? Explain. (Assume that Heineken’s credit rating has remained the same.)

Garrett Camp and Travis Kalanick are the founders of Uber. Assume that the company currently has \(250,000 in equity and is considering a \)100,000 expansion to meet increased demand. The \(100,000 expansion would yield \)16,000 in additional annual income before interest expense. Assume that the business currently earns \(40,000 annual income before interest expense of \)10,000, yielding a return on equity of 12% (\(30,000/\)250,000). To fund the expansion, the company is considering the issuance of a 10-year, \(100,000 note with annual interest payments (the principal due at the end of 10 years).

Required

  1. Using return on equity as the decision criterion, show computations to support or reject the expansion if interest on the \)100,000 note is (a) 10%, (b) 15%, (c) 16%, (d) 17%, and (e) 20%.
  2. What general rule do the results in part 1 illustrate?

Compute the debt-to-equity ratio for each of the following companies. Which company appears to have a riskier financing structure? Explain

Atlanta Company

Spokane Company

Total liabilities

\( 429,000

\) 549,000

Total equity

\( 572,000

\) 1,830,000
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