Exam 2: Non-Current Financial Liabilities

On May 1, 2020, SBC INC. buys a photocopier listed for $2,900. The office supply store agrees to accept a $800 down payment and a $2,100, three-year note payable at $798 per year. The company's banker has suggested that an appropriate market rate is 11% per annum for loans that mature in one year or less and 14% for loans with longer maturities. At what amount will the note be recorded at in the accounting records?

What does an "AAA" credit rating mean?

What is a "covenant"?

Explain how non-current liabilities are measured after initial recognition.

Stay Fit for Life Inc. issues three series of $10,000,000 ten-year bonds dated January 1,2020 on the issue date. Interest is payable on June 30 and December 31 each year. Series A has a coupon rate of 7%; series B is 8%; and series C is 11 %. The market rate of interest at time of issue is 8%. Required: a. Prior to making any numerical calculations, comment on whether: i. Series A will sell at a discount, par, or premium and briefly explain why. ii. Series B will sell at a discount, par, or premium and briefly explain why. iii. Series C will sell at a discount, par, or premium and briefly explain why. b. Prepare journal entries to record the issuance of: i. The series A bonds. ii. The series B bonds. iii. The series C bonds.

Define the following: -A bond indenture

Explain the meaning of financial leverage and leveraged buyout.

A $100,000 5-year 5% bond is issued on January 1, 2020. The bond pays interest annually. The market rate is 7%. What is the selling premium or discount on the bonds, rounded to nearest dollar?

On May 1, 2020, SBC INC. buys a photocopier listed for $2,900. The office supply store agrees to accept a $800 down payment and a $2,100, three-year note payable at $798 per year including interest at 7%. The company's banker has suggested that an appropriate market rate is 11% per annum for loans that mature in one year or less and 14% for loans with longer maturities. At what amount will the photocopier be recorded at in the accounting records?

Define the following: -Secured bonds

Define the following: -Financial liabilities

Which statement is correct about offsetting?

What is the market rate?

Which statement is correct about the financial leverage of a company with an equity base of $400,000?

Define the following: -Serial bonds

What is "firm commitment" underwriting?

Define the following: -Inflation-linked or real-return bonds

Why are banks able to pay such low interest rates on customer deposits?

Based on the characteristics provided below, what kind of bond is being discussed? 1. ________ are a set of bonds issued at the same time but that mature at regular scheduled dates rather than all on the same date. 2. ________ are bonds that never mature. 3. ________ allow the holder to exchange the bond into other securities in the corporation, usually common shares. 4. ________ protect investors against inflation.

Explain the difference between real-return bonds, convertible bonds and perpetual bonds.