150. Sun City issues bonds on January 1, 2012 that pay interest semiannually on June 30 and
December 31. Portions of the bond amortization schedule appear below:
Required:
1. Were the bonds issued at face amount, a discount, or a premium?
2. What is the original issue price of the bonds?
3. What is the face amount of the bonds?
4. What is the term to maturity in years?
5. What is the stated annual interest rate?
6. What is the market annual interest rate?
7. What is the total cash interest paid over the term to maturity?
Answer:
151. Explain how each of the columns in an amortization schedule is calculated, assuming the
bonds are issued at a discount. How is the amortization schedule different if bonds are issued
at a premium?
152. Pizza Pier retires its 7% bonds for $70,000 before their scheduled maturity. At the time,
the bonds have a carrying value of $74,937. Record the early retirement of the bonds.
153. Magic Mountain retires its 8% bonds for $125,000 before their scheduled maturity. At
the time, the bonds have a carrying value of $118,000. Record the early retirement of the
bonds.
154. On January 1, 2012, Julee Enterprises borrows $30,000 to purchase a new Toyota
Highlander by agreeing to a 6%, 4-year note with the bank. Payments of $704.55 are due at
the end of each month with the first installment due on January 31, 2012. Record the issuance
of the note payable and the first two monthly payments.
155. Western World has the following selected data ($ in millions):
Based on these amounts, calculate the following ratios for Western World in 2012:
1. Debt to equity ratio.
2. Return on assets ratio.
3. Return on equity ratio.
4. Times interest earned ratio.
156. Two leading home improvement chains in the United States are Home Depot and Lowes.
Selected financial data for these two close competitors are as follows:
1. Calculate the debt to equity ratio for Home Depot and Lowes. Which company has the
higher ratio?
2. Calculate the times interest earned ratio for Home Depot and Lowes. Which company is
better able to meet interest payments as they become due?
157. What are the potential risks and rewards of carrying additional debt? How does
additional debt affect a company’s return to investors?
1.#