Juicy Energy Industries develops and produces biomass, an altern

Juicy Energy Industries develops and produces biomass, an alternative energy source. The company has an outstanding $10,000,000, 30-year, 10% bond issue dated July 1, 2007. The bond issue is due June 30, 2037. Some bond indentures require the corporation issuing the bonds to transfer cash to a special cash fund, called a sinking fund, over the life of the bond. Such funds help assure investors that there will be adequate cash to pay the bonds at their maturity date.
The bond indenture requires a bond sinking fund, which has a balance of $1,200,000 as of July 1, 2012. The company is currently experiencing a shortage of funds due to a recent acquisition. Dillip Fogel, the company’s treasurer, is considering using the funds from the bond sinking fund to cover payroll and other bills that are coming due at the end of the month. Dillip’s brother-in-law, a trustee in a sinking fund, has indicated willingness to allow Dillip to use the funds from the sinking fund to temporarily meet the company’s cash needs.
Discuss whether Dillip’s proposal is appropriate.

A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...


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