Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Chapter 11, Problem 1TIF
To determine
Discuss the ethical issues related to the issue of long-term bonds, without disclosing the plans of additional issue of long-term bonds.
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CEG Capital Inc. is a large holding company that uses long-term debt extensively to fund its operations. At December 31, the company reported total assets of $100 million, total debt of $55 million, and total equity of $45 million. In January, the company issued $11 billion in long-term bonds to investors at par value. This was the largest debt issuance in the company’s history, and it significantly increased the company’s ratio of total debt to total equity. Five days after the debt issuance, CEG filed legal documents to prepare for an additional $50 billion long-term bond issue. As a result of this filing, the price of the $11 billion in bonds that the company issued earlier in the week dropped to 94 because of the increased risk associated with the company’s debt. The investors in the original $11 billion bond issuance were not informed of the company’s plans to issue additional debt so quickly after the initial bond issue.Did CEG Capital act unethically by not disclosing to initial…
EG Capital Inc. is a large holding company that uses long-term debt extensively to fund its operations. At December 31, the company reported total assets of $100 million, total debt of $55 million, and total equity of $45 million. In January, the company issued $11 billion in long-term bonds to investors at par value. This was the largest debt issuance in the company’s history, and it significantly increased the company’s ratio of total debt to total equity. Five days after the debt issuance, CEG filed legal documents to prepare for an additional $50 billion long-term bond issue. As a result of this filing, the price of the $11 billion in bonds that the company issued earlier in the week dropped to 94 because of the increased risk associated with the company’s debt. The investors in the original $11 billion bond issuance were not informed of the company’s plans to issue additional debt so quickly after the initial bond issue.
Did CEG Capital act unethically by not disclosing to initial…
Thrillville has $41 million in bonds payable. One of the contractual agreements in the bond is that the debt to equity ratio cannot exceed 2.0. Thrillville’s total assets are $81 million, and its liabilities other than the bonds payable are $11 million. The company is considering some additional financing through leasing.Required:1. Calculate total stockholders’ equity using the balance sheet equation.2. Calculate the debt to equity ratio.3. The company enters a lease agreement requiring lease payments with a present value of $16 million. Record the lease.4. Will entering into the lease cause the debt to equity ratio to be in violation of the contractual agreement in the bond? Determine your answer by calculating the debt to equity ratio after recording the lease.
Chapter 11 Solutions
Financial And Managerial Accounting
Ch. 11 - Describe the two distinct obligations incurred by...Ch. 11 - Explain the meaning of each of the following terms...Ch. 11 - If you asked your broker to purchase for you a 12%...Ch. 11 - Prob. 4DQCh. 11 - Prob. 5DQCh. 11 - Prob. 6DQCh. 11 - Prob. 7DQCh. 11 - Fleeson Company needs additional funds to purchase...Ch. 11 - Prob. 9DQCh. 11 - Issuing bonds at face amount On January 1, the...
Ch. 11 - Issuing bonds at a discount On the first day of...Ch. 11 - Prob. 3BECh. 11 - Prob. 4BECh. 11 - Prob. 5BECh. 11 - Prob. 6BECh. 11 - Times interest earned Averill Products Inc....Ch. 11 - Prob. 1ECh. 11 - Entries for issuing bonds Thomson Co. produces and...Ch. 11 - Prob. 3ECh. 11 - Prob. 4ECh. 11 - Prob. 5ECh. 11 - Entries for issuing and calling bonds; gain Mia...Ch. 11 - Prob. 7ECh. 11 - Present value of amounts due Assume that you are...Ch. 11 - Prob. 9ECh. 11 - Present value of an annuity On January 1, you win...Ch. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prob. 13ECh. 11 - Prob. 14ECh. 11 - Appendix 2 Amortize premium by interest method...Ch. 11 - Prob. 16ECh. 11 - Prob. 17ECh. 11 - Bond discount, entries for bonds payable...Ch. 11 - Prob. 2PACh. 11 - Entries for bonds payable, including bond...Ch. 11 - Appendix 1 and Appendix 2 Bond discount, entries...Ch. 11 - Prob. 5PACh. 11 - Bond discount, entries for bonds payable...Ch. 11 - Prob. 2PBCh. 11 - Entries for bonds payable, including bond...Ch. 11 - Prob. 4PBCh. 11 - Prob. 5PBCh. 11 - Analyze and compare Amazon.com and Wal-Mart...Ch. 11 - Analyze and compare Clorox and Procter Gamble The...Ch. 11 - Prob. 3MADCh. 11 - Analyze and compare Hilton and Marriott Hilton...Ch. 11 - Prob. 1TIFCh. 11 - Prob. 3TIFCh. 11 - Prob. 4TIF
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