When Eli Lilly, a major pharmaceutical company, chose to refinance some of its outstanding bonds payable, the

Question:

When Eli Lilly, a major pharmaceutical company, chose to refinance some of its outstanding bonds payable, the company paid off the outstanding debt and replaced it with a new bond issuance. At the time of the refinancing, the value of the outstanding debt was approximately $35 million. On the company’s income statement a loss of $7.2 million (net of $4.8 million in tax benefits) was reported.
(a) Compute the payment made by Eli Lilly to retire the original debt.
(b) How did the company benefits from the $4.8 million tax effect?
(c) Lilly uses the indirect method of presentation for the statements of cash flows. How was the loss treated on that statement?
(d) How was the loss disclosed on the income statement?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...