(a) To calculate: No. of shares when notes are converted into shares of stock Introduction: Convertible Subordinate Notes are short term debts that are not paid unless the senior debtholders have been paid. Hence, it is the subordinate of the senior debt. Moreover, debtholders can exchange the subordinate notes with the shares of common stock.

Question

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Answer 1

Question

Chapter 7, Problem 7.35C

To determine

(a)

To calculate:

No. of shares when notes are converted into shares of stock

Introduction:

Convertible Subordinate Notes are short term debts that are not paid unless the senior debtholders have been paid. Hence, it is the subordinate of the senior debt. Moreover, debtholders can exchange the subordinate notes with the shares of common stock.

To determine

(b)

Whether Senior Notes would be redeemable at discount, premium or at par.

Introduction:

Notes can be redeemable i.e. can be redeemed before its maturity date and are like callable bonds. Redeemable callable bonds can be paid off by the issuer before the maturity, so it has higher annual rate of return to compensate the risk. Although, they have a disadvantage that it is difficult to reinvest in such bonds.

To determine

(c)

The meaning of the statement that backup credit facility with a consortium of banks up to $800 million has been granted to the firm. It contains various restrictive covenants, none of which is expected to materially impact the company's resources or liquidity.

Introduction:

Backup credit facility is a credit line for commercial papers. Commercial Papers are issued by creditworthy companies only. Banks promises to pay off the invested amount if the company defaults on its promise.

To determine

(d)

Information required for "Capital Lease Obligation" while assessing the overall liquidity and leverage.

Introduction:

Capital Lease Obligation is a long-term obligation which arises when land is taken on lease by the lessee. Lessee is the tenant of the property whereas lessor is the owner.

Liquidity is the ability of the firm to pay off its short-term obligations using current assets.

Leverage is using the debt to raise the potential return made in various investments.

To determine

(e)

The meaning of "Interest Imputed at rates between 5.2% and 10%".

Introduction:

Interest in imputed when the agreed rate of interest on loan or note differs from the market interest rate. In such a case, imputed interest is considered so that note represent the present value of the consideration paid.

To determine

(f)

Unsecured Bank Loan is immaterial to the total assets of the firm.

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

To determine

(g)

Why Current installments on the long-term debt is immaterial?

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

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Answer 2

Question

Chapter 7, Problem 7.35C

To determine

(a)

To calculate:

No. of shares when notes are converted into shares of stock

Introduction:

Convertible Subordinate Notes are short term debts that are not paid unless the senior debtholders have been paid. Hence, it is the subordinate of the senior debt. Moreover, debtholders can exchange the subordinate notes with the shares of common stock.

To determine

(b)

Whether Senior Notes would be redeemable at discount, premium or at par.

Introduction:

Notes can be redeemable i.e. can be redeemed before its maturity date and are like callable bonds. Redeemable callable bonds can be paid off by the issuer before the maturity, so it has higher annual rate of return to compensate the risk. Although, they have a disadvantage that it is difficult to reinvest in such bonds.

To determine

(c)

The meaning of the statement that backup credit facility with a consortium of banks up to $800 million has been granted to the firm. It contains various restrictive covenants, none of which is expected to materially impact the company's resources or liquidity.

Introduction:

Backup credit facility is a credit line for commercial papers. Commercial Papers are issued by creditworthy companies only. Banks promises to pay off the invested amount if the company defaults on its promise.

To determine

(d)

Information required for "Capital Lease Obligation" while assessing the overall liquidity and leverage.

Introduction:

Capital Lease Obligation is a long-term obligation which arises when land is taken on lease by the lessee. Lessee is the tenant of the property whereas lessor is the owner.

Liquidity is the ability of the firm to pay off its short-term obligations using current assets.

Leverage is using the debt to raise the potential return made in various investments.

To determine

(e)

The meaning of "Interest Imputed at rates between 5.2% and 10%".

Introduction:

Interest in imputed when the agreed rate of interest on loan or note differs from the market interest rate. In such a case, imputed interest is considered so that note represent the present value of the consideration paid.

To determine

(f)

Unsecured Bank Loan is immaterial to the total assets of the firm.

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

To determine

(g)

Why Current installments on the long-term debt is immaterial?

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

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Answer 3

Question

Chapter 7, Problem 7.35C

To determine

(a)

To calculate:

No. of shares when notes are converted into shares of stock

Introduction:

Convertible Subordinate Notes are short term debts that are not paid unless the senior debtholders have been paid. Hence, it is the subordinate of the senior debt. Moreover, debtholders can exchange the subordinate notes with the shares of common stock.

To determine

(b)

Whether Senior Notes would be redeemable at discount, premium or at par.

Introduction:

Notes can be redeemable i.e. can be redeemed before its maturity date and are like callable bonds. Redeemable callable bonds can be paid off by the issuer before the maturity, so it has higher annual rate of return to compensate the risk. Although, they have a disadvantage that it is difficult to reinvest in such bonds.

To determine

(c)

The meaning of the statement that backup credit facility with a consortium of banks up to $800 million has been granted to the firm. It contains various restrictive covenants, none of which is expected to materially impact the company's resources or liquidity.

Introduction:

Backup credit facility is a credit line for commercial papers. Commercial Papers are issued by creditworthy companies only. Banks promises to pay off the invested amount if the company defaults on its promise.

To determine

(d)

Information required for "Capital Lease Obligation" while assessing the overall liquidity and leverage.

Introduction:

Capital Lease Obligation is a long-term obligation which arises when land is taken on lease by the lessee. Lessee is the tenant of the property whereas lessor is the owner.

Liquidity is the ability of the firm to pay off its short-term obligations using current assets.

Leverage is using the debt to raise the potential return made in various investments.

To determine

(e)

The meaning of "Interest Imputed at rates between 5.2% and 10%".

Introduction:

Interest in imputed when the agreed rate of interest on loan or note differs from the market interest rate. In such a case, imputed interest is considered so that note represent the present value of the consideration paid.

To determine

(f)

Unsecured Bank Loan is immaterial to the total assets of the firm.

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

To determine

(g)

Why Current installments on the long-term debt is immaterial?

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

Expert Solution & Answer

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Answer 4

Question

Chapter 7, Problem 7.35C

To determine

(a)

To calculate:

No. of shares when notes are converted into shares of stock

Introduction:

Convertible Subordinate Notes are short term debts that are not paid unless the senior debtholders have been paid. Hence, it is the subordinate of the senior debt. Moreover, debtholders can exchange the subordinate notes with the shares of common stock.

To determine

(b)

Whether Senior Notes would be redeemable at discount, premium or at par.

Introduction:

Notes can be redeemable i.e. can be redeemed before its maturity date and are like callable bonds. Redeemable callable bonds can be paid off by the issuer before the maturity, so it has higher annual rate of return to compensate the risk. Although, they have a disadvantage that it is difficult to reinvest in such bonds.

To determine

(c)

The meaning of the statement that backup credit facility with a consortium of banks up to $800 million has been granted to the firm. It contains various restrictive covenants, none of which is expected to materially impact the company's resources or liquidity.

Introduction:

Backup credit facility is a credit line for commercial papers. Commercial Papers are issued by creditworthy companies only. Banks promises to pay off the invested amount if the company defaults on its promise.

To determine

(d)

Information required for "Capital Lease Obligation" while assessing the overall liquidity and leverage.

Introduction:

Capital Lease Obligation is a long-term obligation which arises when land is taken on lease by the lessee. Lessee is the tenant of the property whereas lessor is the owner.

Liquidity is the ability of the firm to pay off its short-term obligations using current assets.

Leverage is using the debt to raise the potential return made in various investments.

To determine

(e)

The meaning of "Interest Imputed at rates between 5.2% and 10%".

Introduction:

Interest in imputed when the agreed rate of interest on loan or note differs from the market interest rate. In such a case, imputed interest is considered so that note represent the present value of the consideration paid.

To determine

(f)

Unsecured Bank Loan is immaterial to the total assets of the firm.

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

To determine

(g)

Why Current installments on the long-term debt is immaterial?

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

Expert Solution & Answer

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See solution

Answer 5

Chapter 7, Problem 7.35C

To determine

(a)

To calculate:

No. of shares when notes are converted into shares of stock

Introduction:

Convertible Subordinate Notes are short term debts that are not paid unless the senior debtholders have been paid. Hence, it is the subordinate of the senior debt. Moreover, debtholders can exchange the subordinate notes with the shares of common stock.

To determine

(b)

Whether Senior Notes would be redeemable at discount, premium or at par.

Introduction:

Notes can be redeemable i.e. can be redeemed before its maturity date and are like callable bonds. Redeemable callable bonds can be paid off by the issuer before the maturity, so it has higher annual rate of return to compensate the risk. Although, they have a disadvantage that it is difficult to reinvest in such bonds.

To determine

(c)

The meaning of the statement that backup credit facility with a consortium of banks up to $800 million has been granted to the firm. It contains various restrictive covenants, none of which is expected to materially impact the company's resources or liquidity.

Introduction:

Backup credit facility is a credit line for commercial papers. Commercial Papers are issued by creditworthy companies only. Banks promises to pay off the invested amount if the company defaults on its promise.

To determine

(d)

Information required for "Capital Lease Obligation" while assessing the overall liquidity and leverage.

Introduction:

Capital Lease Obligation is a long-term obligation which arises when land is taken on lease by the lessee. Lessee is the tenant of the property whereas lessor is the owner.

Liquidity is the ability of the firm to pay off its short-term obligations using current assets.

Leverage is using the debt to raise the potential return made in various investments.

To determine

(e)

The meaning of "Interest Imputed at rates between 5.2% and 10%".

Introduction:

Interest in imputed when the agreed rate of interest on loan or note differs from the market interest rate. In such a case, imputed interest is considered so that note represent the present value of the consideration paid.

To determine

(f)

Unsecured Bank Loan is immaterial to the total assets of the firm.

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

To determine

(g)

Why Current installments on the long-term debt is immaterial?

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

Answer 6

Chapter 7, Problem 7.35C

To determine

(a)

To calculate:

No. of shares when notes are converted into shares of stock

Introduction:

Convertible Subordinate Notes are short term debts that are not paid unless the senior debtholders have been paid. Hence, it is the subordinate of the senior debt. Moreover, debtholders can exchange the subordinate notes with the shares of common stock.

Answer 7

Chapter 7, Problem 7.35C

To determine

(a)

To calculate:

No. of shares when notes are converted into shares of stock

Introduction:

Convertible Subordinate Notes are short term debts that are not paid unless the senior debtholders have been paid. Hence, it is the subordinate of the senior debt. Moreover, debtholders can exchange the subordinate notes with the shares of common stock.

Answer 8

To determine

(b)

Whether Senior Notes would be redeemable at discount, premium or at par.

Introduction:

Notes can be redeemable i.e. can be redeemed before its maturity date and are like callable bonds. Redeemable callable bonds can be paid off by the issuer before the maturity, so it has higher annual rate of return to compensate the risk. Although, they have a disadvantage that it is difficult to reinvest in such bonds.

Answer 9

To determine

(b)

Whether Senior Notes would be redeemable at discount, premium or at par.

Introduction:

Notes can be redeemable i.e. can be redeemed before its maturity date and are like callable bonds. Redeemable callable bonds can be paid off by the issuer before the maturity, so it has higher annual rate of return to compensate the risk. Although, they have a disadvantage that it is difficult to reinvest in such bonds.

Answer 10

To determine

(c)

The meaning of the statement that backup credit facility with a consortium of banks up to $800 million has been granted to the firm. It contains various restrictive covenants, none of which is expected to materially impact the company's resources or liquidity.

Introduction:

Backup credit facility is a credit line for commercial papers. Commercial Papers are issued by creditworthy companies only. Banks promises to pay off the invested amount if the company defaults on its promise.

Answer 11

To determine

(c)

The meaning of the statement that backup credit facility with a consortium of banks up to $800 million has been granted to the firm. It contains various restrictive covenants, none of which is expected to materially impact the company's resources or liquidity.

Introduction:

Backup credit facility is a credit line for commercial papers. Commercial Papers are issued by creditworthy companies only. Banks promises to pay off the invested amount if the company defaults on its promise.

Answer 12

To determine

(d)

Information required for "Capital Lease Obligation" while assessing the overall liquidity and leverage.

Introduction:

Capital Lease Obligation is a long-term obligation which arises when land is taken on lease by the lessee. Lessee is the tenant of the property whereas lessor is the owner.

Liquidity is the ability of the firm to pay off its short-term obligations using current assets.

Leverage is using the debt to raise the potential return made in various investments.

Answer 13

To determine

(d)

Information required for "Capital Lease Obligation" while assessing the overall liquidity and leverage.

Introduction:

Capital Lease Obligation is a long-term obligation which arises when land is taken on lease by the lessee. Lessee is the tenant of the property whereas lessor is the owner.

Liquidity is the ability of the firm to pay off its short-term obligations using current assets.

Leverage is using the debt to raise the potential return made in various investments.

Answer 14

To determine

(e)

The meaning of "Interest Imputed at rates between 5.2% and 10%".

Introduction:

Interest in imputed when the agreed rate of interest on loan or note differs from the market interest rate. In such a case, imputed interest is considered so that note represent the present value of the consideration paid.

Answer 15

To determine

(e)

The meaning of "Interest Imputed at rates between 5.2% and 10%".

Introduction:

Interest in imputed when the agreed rate of interest on loan or note differs from the market interest rate. In such a case, imputed interest is considered so that note represent the present value of the consideration paid.

Answer 16

To determine

(f)

Unsecured Bank Loan is immaterial to the total assets of the firm.

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

Answer 17

To determine

(f)

Unsecured Bank Loan is immaterial to the total assets of the firm.

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

Answer 18

To determine

(g)

Why Current installments on the long-term debt is immaterial?

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

Answer 19

To determine

(g)

Why Current installments on the long-term debt is immaterial?

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

Answer 20

Expert Solution & Answer

Answer 21

Expert Solution & Answer

Answer 22

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Answer 23

Ch. 7 - Prob. 7.1ME Ch. 7 - Mini-Exercise 7.2 LO 4 Other accrued...Ch. 7 - Mini-Exercise 7.3 LO 5 Other accrued...Ch. 7 - Prob. 7.4ME Ch. 7 - Exercise 7.5 LO 2 Notes payable-discount basis On...Ch. 7 - Prob. 7.6E Ch. 7 - Exercise 7.7 LO 4 Other accrued...Ch. 7 - Exercise 7.8 LO 5 Other accrued liabilities-real...Ch. 7 - Exercise 7.9 LO 5 Other accrued...Ch. 7 - Exercise 7.10 LO 5 Other accrued...

(f) Unsecured Bank Loan is immaterial to the total assets of the firm. Introduction: Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

(g) Why Current installments on the long-term debt is immaterial? Introduction: Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

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Chapter 7 Solutions

(f)

Unsecured Bank Loan is immaterial to the total assets of the firm.

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.

(g)

Why Current installments on the long-term debt is immaterial?

Introduction:

Immaterial is something that have no or very less value to affect the financial statement of the firm. Immaterial also means something that is not constant in the financial statement and occurs unusually.