Question 1

Explain the differences in the components of interest expense for the bonds sold at face value, at a discount, and at a premium.

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Question 2

Shell Company sells a product that carries a 60-day unconditional warranty against product failure. Based on statistical analysis, Shell knows that between the time of sale and the lapse of the warranty, 4% of the units sold will fail and require repair at an avenge cost of $40 per unit. 
The following data reflect the first three months during which the product was sold.
 
 What amount will Shell record for its estimated liability for product warranties at December 31? Assume that warranty costs of known failures have already been reflected in the records.

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Question 3

Marks, Inc. has $700 working capital and $1,650 of current assets, what is the firm's current liabilities?

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Question 4

Use the selected balance sheet and income statement information below for Sunshine, Inc. to compute the times-interest-earned ratio. Explain what information this ratio provides.

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Question 5

Use the selected balance sheet and income statement information below for Carolco Inc. to compute the current ratio. Explain what information this ratio provides.

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Question 6

Hanover Investments recently issued bonds with a face value of $1,000,000 and a coupon rate of 5% for 6 years. The market rate of interest is 4% and the bonds pay interest semi-annually. Compute the market value of the bond on the issue date.

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Question 7

If Ray's Motor Parts issues $2,300,000 in 6% bonds due in 5 years with semiannual interest payments, how much should it expect to raise if the market return for similar bonds is 8%?

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Question 8

Selected balance sheet and income statement information for a jewelry company for 2017 through 2019 follows:
  
a. Compute the current ratio for each year and discuss any trends.
b. Compute times interest earned for each year and discuss any trends.

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Question 9

Selected balance sheet and income statement information for the office supply retailer, Ruler Co., for 2017 through 2019 follows:
  
a. Compute the current ratio for each year and discuss any trends.
b. Compute times-interest-earned ratio for each year and discuss any trends.

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Question 10

Just for Lunch plans to issue 20-year bonds with a face value of $7,200,000 and a coupon rate of 5.5%. The market rate of interest is 4%. Interest payments will be made semi-annually. 
Compute the market value of the bonds.

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Question 11

Scores Company issues $500,000 of 8% bonds that pay interest semiannually and mature in 10 years. Compute the bonds' issue price assuming that the bonds' market interest rate is:
a. 6% per year compounded semiannually
b. 10% per year compounded semiannually

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Question 12

Rosco Corporation issued $60,000,000 in bonds which mature in 5 years. The bonds pay a 10% semiannual coupon. The current market rate for similar bonds is 8%.
a. At what price should this bond offering sell?
b. Create a table showing the amortized premium or discount the first three years of the bonds.
c. How much is the book value of the bonds at the end of the first year (2 payments)?

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Quiz 9: Liabilities

Explain the differences in the components of interest expense for the bonds sold at face value, at a discount, and at a premium.

Marks, Inc. has $700 working capital and $1,650 of current assets, what is the firm's current liabilities?

Use the selected balance sheet and income statement information below for Sunshine, Inc. to compute the times-interest-earned ratio. Explain what information this ratio provides.

Use the selected balance sheet and income statement information below for Carolco Inc. to compute the current ratio. Explain what information this ratio provides.

Hanover Investments recently issued bonds with a face value of $1,000,000 and a coupon rate of 5% for 6 years. The market rate of interest is 4% and the bonds pay interest semi-annually. Compute the market value of the bond on the issue date.

If Ray's Motor Parts issues $2,300,000 in 6% bonds due in 5 years with semiannual interest payments, how much should it expect to raise if the market return for similar bonds is 8%?

Selected balance sheet and income statement information for a jewelry company for 2017 through 2019 follows: a. Compute the current ratio for each year and discuss any trends. b. Compute times interest earned for each year and discuss any trends.

Selected balance sheet and income statement information for the office supply retailer, Ruler Co., for 2017 through 2019 follows: a. Compute the current ratio for each year and discuss any trends. b. Compute times-interest-earned ratio for each year and discuss any trends.

Just for Lunch plans to issue 20-year bonds with a face value of $7,200,000 and a coupon rate of 5.5%. The market rate of interest is 4%. Interest payments will be made semi-annually. Compute the market value of the bonds.

Scores Company issues $500,000 of 8% bonds that pay interest semiannually and mature in 10 years. Compute the bonds' issue price assuming that the bonds' market interest rate is: a. 6% per year compounded semiannually b. 10% per year compounded semiannually