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 6% stated rate bonds with a face amount of $110 million. The bonds mature on December 31, 2044 (20 years). The market rate of interest for similar bond issues was 7% (3.5% semiannual rate). Interest is paid semiannually (3.0%) 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 $370,000 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 $390,000 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 an 8% 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) Bond liability Lease A liability Lease B liability $ 98,254,431
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 6% stated rate bonds with a face amount of $110 million. The bonds mature on December 31, 2044 (20 years). The market rate of interest for similar bond issues was 7% (3.5% semiannual rate). Interest is paid semiannually (3.0%) 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 $370,000 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 $390,000 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 an 8% 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) Bond liability Lease A liability Lease B liability $ 98,254,431
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 15MCQ
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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 6% stated rate bonds with a face amount of $110 million. The bonds mature on December
31, 2044 (20 years). The market rate of interest for similar bond issues was 7% (3.5% semiannual
rate). Interest is paid semiannually (3.0%) 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
$370,000 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 $390,000 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 an 8% 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)
Bond liability
Lease A liability
Lease B liability
$
98,254,431
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