On the last day of its fiscal year ending December 31, 2024, the Safe & Reliable (S&R) Glass Company completed two financing arrangements. The funds provided by these initiatives will allow the company to expand its operations. 1. S&R issued 7% stated rate bonds with a face amount of $100 million. The bonds mature on December 31, 2044 (20 years). The market rate of interest for similar bond issues was 8% (4.0% semiannual rate). Interest is paid semiannually (3.5%) on June 30 and December 31, beginning on June 30, 2025. 2. The company leased two manufacturing facilities. Lease A requires 20 annual lease payments of $290,000 beginning on January 1, 2025. Lease B also is for 20 years, beginning January 1, 2025. Terms of the lease require 17 annual lease payments of $310,000 beginning on January 1, 2028. Generally accepted accounting principles require both leases to be recorded as liabilities for the present value of the scheduled payments. Assume that a 9% interest rate properly reflects the time value of money for the lease obligations.
On the last day of its fiscal year ending December 31, 2024, the Safe & Reliable (S&R) Glass Company completed two financing arrangements. The funds provided by these initiatives will allow the company to expand its operations. 1. S&R issued 7% stated rate bonds with a face amount of $100 million. The bonds mature on December 31, 2044 (20 years). The market rate of interest for similar bond issues was 8% (4.0% semiannual rate). Interest is paid semiannually (3.5%) on June 30 and December 31, beginning on June 30, 2025. 2. The company leased two manufacturing facilities. Lease A requires 20 annual lease payments of $290,000 beginning on January 1, 2025. Lease B also is for 20 years, beginning January 1, 2025. Terms of the lease require 17 annual lease payments of $310,000 beginning on January 1, 2028. Generally accepted accounting principles require both leases to be recorded as liabilities for the present value of the scheduled payments. Assume that a 9% interest rate properly reflects the time value of money for the lease obligations.
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter14: Long-term Liabilities: Bonds And Notes
Section: Chapter Questions
Problem 6PA: Saverin, Inc. produces and sells outdoor equipment. On July 1, 2016, Saverin, Inc. issued 62,500,000...
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Question
![On the last day of its fiscal year ending December 31, 2024, the Safe & Reliable (S&R) Glass Company completed two financing
arrangements. The funds provided by these initiatives will allow the company to expand its operations.
1. S&R issued 7% stated rate bonds with a face amount of $100 million. The bonds mature on December 31, 2044 (20 years). The
market rate of interest for similar bond issues was 8% (4.0% semiannual rate). Interest is paid semiannually (3.5%) on June 30 and
December 31, beginning on June 30, 2025.
2. The company leased two manufacturing facilities. Lease A requires 20 annual lease payments of $290,000 beginning on
January 1, 2025. Lease B also is for 20 years, beginning January 1, 2025. Terms of the lease require 17 annual lease payments of
$310,000 beginning on January 1, 2028. Generally accepted accounting principles require both leases to be recorded as
liabilities for the present value of the scheduled payments. Assume that a 9% interest rate properly reflects the time value of
money for the lease obligations.
Required:
What amounts will appear in S&R's December 31, 2024, balance sheet for the bonds and for the leases?
Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a
financial calculator. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1)
Answer is complete but not entirely correct.
Bond liability
90,103,613
Lease A
2,647,278
liability
Lease B
2,045,148
liability
$
$
$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd8155ced-9ae0-40f9-bc5c-d5d57112b6d0%2F80d6cfe4-2970-45f2-bc49-87e0efd82077%2Fr9hbd27_processed.png&w=3840&q=75)
Transcribed Image Text:On the last day of its fiscal year ending December 31, 2024, the Safe & Reliable (S&R) Glass Company completed two financing
arrangements. The funds provided by these initiatives will allow the company to expand its operations.
1. S&R issued 7% stated rate bonds with a face amount of $100 million. The bonds mature on December 31, 2044 (20 years). The
market rate of interest for similar bond issues was 8% (4.0% semiannual rate). Interest is paid semiannually (3.5%) on June 30 and
December 31, beginning on June 30, 2025.
2. The company leased two manufacturing facilities. Lease A requires 20 annual lease payments of $290,000 beginning on
January 1, 2025. Lease B also is for 20 years, beginning January 1, 2025. Terms of the lease require 17 annual lease payments of
$310,000 beginning on January 1, 2028. Generally accepted accounting principles require both leases to be recorded as
liabilities for the present value of the scheduled payments. Assume that a 9% interest rate properly reflects the time value of
money for the lease obligations.
Required:
What amounts will appear in S&R's December 31, 2024, balance sheet for the bonds and for the leases?
Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a
financial calculator. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1)
Answer is complete but not entirely correct.
Bond liability
90,103,613
Lease A
2,647,278
liability
Lease B
2,045,148
liability
$
$
$
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