On January 1 of this year, Cunningham Corporation issued bonds with a face value of $211,000 and a coupon rate of 6 percent. The bonds mature in 30 years and pay interest annually every December 31. When the bonds were sold, the annual market rate of interest was 8 percent. The company uses the effective-interest amortization method. By December 31 of this year, the annual market rate of interest had increased to 10 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided.
On January 1 of this year, Cunningham Corporation issued bonds with a face value of $211,000 and a coupon rate of 6 percent. The bonds mature in 30 years and pay interest annually every December 31. When the bonds were sold, the annual market rate of interest was 8 percent. The company uses the effective-interest amortization method. By December 31 of this year, the annual market rate of interest had increased to 10 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1 of this year, Cunningham Corporation issued bonds with a face value of $211,000 and a coupon rate of 6
percent. The bonds mature in 30 years and pay interest annually every December 31. When the bonds were sold, the
annual market rate of interest was 8 percent. The company uses the effective-interest amortization method. By December
31 of this year, the annual market rate of interest had increased to 10 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1)
Note: Use appropriate factor(s) from the tables provided.
3. Determine whether the company's debt-to-equity ratio and times interest earned ratio increase, decrease, or stay the same when (a)
the bonds are issued and (b) interest expense is recorded and cash is paid to investors for interest.
Note: Select "NE" if there is no effect.
Date
Issue date
Interest payment date
Debt-to-Equity
Times Interest Earned](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7f160f1b-d125-4cf2-9b01-27d1eef1b8b8%2F7242b994-f229-4e3e-9ac1-60954a598726%2F9qfittn_processed.png&w=3840&q=75)
Transcribed Image Text:5
Part 3 of 3
Skipped
Required information
[The following information applies to the questions displayed below.]
On January 1 of this year, Cunningham Corporation issued bonds with a face value of $211,000 and a coupon rate of 6
percent. The bonds mature in 30 years and pay interest annually every December 31. When the bonds were sold, the
annual market rate of interest was 8 percent. The company uses the effective-interest amortization method. By December
31 of this year, the annual market rate of interest had increased to 10 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1)
Note: Use appropriate factor(s) from the tables provided.
3. Determine whether the company's debt-to-equity ratio and times interest earned ratio increase, decrease, or stay the same when (a)
the bonds are issued and (b) interest expense is recorded and cash is paid to investors for interest.
Note: Select "NE" if there is no effect.
Date
Issue date
Interest payment date
Debt-to-Equity
Times Interest Earned
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