Assume Lyda Inc. sold bonds with a face value of P500,000 for P530,000. Was the market interest rate equal to or greater than the bonds’ contractual interest rat
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Assume Lyda Inc. sold bonds with a face value of P500,000 for P530,000. Was the market interest rate equal to or greater than the bonds’ contractual interest rate?
What are the financial ratios used to analyze current liabilities and long-term liabilities?
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- how Will long term bonds effect current ratio, acid test ratio, and debt to equity ratio? how will purchase inventory effect Current ratio, acid test ratio, debt to equity ratio? how will these effect the ratios mention above: retirement of bonds, sale of common stock, purchase of short-term investment for cash, and decision to refinance on a long term basis some currently maturing debt? ,Which of the following is false? A) Interest expense reported in the income statement equals the stated interest rate times the face value of debt outstanding during the period B) Most corporate bonds pay interest semiannually or annually C) Cash interest expense equals the coupon rate times the face value of debt outstanding during the period D) Interest expense reported in the income statement equals the market interest rate at issuance times the carrying value of the debt during the period O A O B O DWhen a company retires bonds early, the gain or loss on the retirement is the differencebetween the cash paid and thea. face value of the bonds.b. maturity value of the bonds.c. carrying value of the bonds.d. original selling price of the bonds.
- Listed below are several terms and phrases associated with current liabilities. Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it. 1. 2. Payable with current assets. 3. List A Face amount x Interest rate x Time. 4. a. b. Short-term debt to be refinanced with common stock. c. Present value of interest plus present value of principal. 5. Noninterest-bearing. 6. Noncommitted line of credit. 7. Pledged accounts receivable. 8. Reclassification of debt. 9. Purchased by other corporations. 10. Expenses not yet paid. 11. Liability until refunded. 12. Liability until satisfy performance obligation d. e. f. g. |h. I. J. k. 1. List B Informal agreement Secured loan Refinancing prior to the issuance of the financial statements Accounts payable Accrued liabilities Commercial paper Current liabilities Long-term liability Usual valuation of liabilities Interest on debt Customer advances Customer depositsa. Assume that the market interest rates were slightly higher than 9% when the bonds were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount? Explain. b. Independent of your answer to part a, assume that the proceeds were $14,820,000. Use the horizontal model (or write the journal entry) to show the effect of issuing the bonds. C. Calculate the interest expense that Coley Co. will show with respect to these bonds in its income statement for the fiscal year ended September 30, 2013, assuming that the discount of $180.000 is amortized on a straight-line basis.Calculate the debt management ratios, that is, the debt and times-interestearned ratios.(a) (1.22, 12.56) (b) (0.55, 26.60)(c) (0.75,26.60) (d) (1.22, 22.55)
- The selling price for bonds is computed by calculating the present value of future cash receipts by using the contract rate of interest. True or FalseCan the yield on company traded bonds be used as an estimate for some, or all, of the company’s debt. If not, can credit spreads be obtained that can be used to estimate the cost of debt?What is the typical relationship among interest rates onthree-month Treasury bills, long-term Treasury bonds,and Baa corporate bonds?
- What kind of account is the Discount on Bonds Payable? What kind of account is the Premium on Bonds Payable?Can the yield on company traded bonds can be used as an estimate for some, or all, of the company’s debt. If not, can credit spreads be obtained from a financial data provider that can be used to estimate the cost of debt?interest payment for bonds is calculated using the face value of the bonds and the __________ A. market value B. market interest rate C. stated interest rate D. original cost