Thrillville has $39 million in bonds payable. One of the contractual agreements in the bond is...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Thrillville has $39 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 $79 million, and its liabilities other than the bonds payable are $9 million. The company is considering some additional financing through leasing. The company enters a lease agreement requiring lease payments with a present value of $14.0 million. 4-a. Will entering into the lease cause the debt to equity ratio to be in violation of the contractual agreement in the bond? 4-b. Determine your answer by calculating the debt to equity ratio after recording the lease. Complete this question by entering your answers in the tabs below. Req 4A Req 4B The company enters a lease agreement requiring lease payments with a present value of $14.0 million. Determine your answer by calculating the debt to equity ratio after recording the lease. (Enter your answers in millions (1.e., $5,500,000 should be entered as 5.5) rounded to 1 decimal place, Round ratio answer to 2 decimal places.) Debt to Equity Ratio Numerator/Denominator Amounts Total liabilities %24 48.0 1.55 Total stockholders' equity 31.0 Thrillville has $39 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 $79 million, and its liabilities other than the bonds payable are $9 million. The company is considering some additional financing through leasing. The company enters a lease agreement requiring lease payments with a present value of $14.0 million. 4-a. Will entering into the lease cause the debt to equity ratio to be in violation of the contractual agreement in the bond? 4-b. Determine your answer by calculating the debt to equity ratio after recording the lease. Complete this question by entering your answers in the tabs below. Req 4A Req 4B The company enters a lease agreement requiring lease payments with a present value of $14.0 million. Determine your answer by calculating the debt to equity ratio after recording the lease. (Enter your answers in millions (1.e., $5,500,000 should be entered as 5.5) rounded to 1 decimal place, Round ratio answer to 2 decimal places.) Debt to Equity Ratio Numerator/Denominator Amounts Total liabilities %24 48.0 1.55 Total stockholders' equity 31.0
Expert Answer:
Answer rating: 100% (QA)
Answer Yes 4b Total assets before the lease 79 million Total debt ... View the full answer
Related Book For
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson
Posted Date:
Students also viewed these accounting questions
-
A firm has a debt to equity ratio of 40%, debt of $250,000, and net income of $100,000. The return on equity is?
-
Determine the debt to equity ratio for the construction company in Figures 6-1 and 6-2. Figures 6-1 WEST MOUNTAIN CONSTRUCTION BALANCE SHEET Figures 6-2 WEST MOUNTAIN CONSTRUCTION INCOME STATEMENT...
-
Determine the debt to equity ratio for the construction company in Figures 6-3 and 6-4. What insight does this give you into the companys financial operations? FIGURE 6-3 Balance Sheet for Eastside...
-
Sulfur trioxide reacts with water to form sulfuric acid, a major contributor to acid rain. One origin of SO 3 is the combustion of sulfur, which is present in small quantities in coal, according to...
-
In a large manufacturing organization supplying goods and services, several departments may be involved in the processing of customer complaints and the issuance of any resulting credit memos....
-
When preparing a Consolidated Statement of financial position the identifiable non-monetary assets of the subsidiary need to be fair valued for which of the following reasons? (a) To inform the...
-
Will the pilot experience any negative compressibility effects at the critical Mach number?
-
The following notes receivable transactions occurred for the Harris Company during the last three months of the current year. (Assume all notes are dated the day the transaction occurred.) Oct. 9...
-
A bond selling at par has a maturity of 12 years and a coupon rate of 8 percent . What is the predicted new price of the bond if interest rates decrease by one percent?
-
Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is the sale of fine European juicing machines. The owner of...
-
Gabriel operates a small manufacturing business with an annual turnover of less than $2 million. During the current year ended 30 June Gabriel disposes of a CGT asset for $65,000. The asset has been...
-
How is the cost of debt estimated? What about the cost of equity?
-
What important changes have occurred in the structure of stock markets in the last two decades?
-
What factor most influences a businesss debt maturity structure?
-
By what factor would your weight change if Earths diameter were doubled and its mass were doubled?
-
What is a call provision, and when are bonds typically called?
-
Intel' adjusted trial balance shows the following data at the end of 2020: 5-year Bonds Payable 8% Bond Interest Payable Premium on Bonds Payable Notes Payable (3 mo.) Notes Payable (5 yr.) Mortgage...
-
You are maintaining a subsidiary ledger account for Police-Training Expenditures for 2013. The following columns are used: Inventory purchases are initially recorded as expenditures. Record the...
-
Reggi Vineyards produces a full line of varietal wines. The company, whose fiscal year begins on November 1, has just completed a record-breaking year. Its inventory account balances on October 31 of...
-
On May 31, the inventory balances of Tog Designs, a manufacturer of high- quality childrens clothing, were as follows: Materials Inventory, $21,360; Work in Process Inventory, $15,112; and Finished...
-
Match the items with the related statements that follow. a. Internal control b. A need of internal control c. Managements responsibility d. Independent accountants audit 1. Evaluates managements...
-
Polyethylene bottles are used to contain fluids as various as milk and engine oil. A typical polyethylene bottle weighs about 30 grams and has a wall thickness of about \(0.8 \mathrm{~mm}\). The...
-
This exercise and the next require the use of the CES Edu-Pack Materials Selection software. a. Use CES to select a joining process to meet the following requirements. b. Use CES to select a joining...
-
This exercise, like the last, requires the use of the CES Edu-Pack Materials Selection software. a. Use CES to select a surface-treatment process to meet the following requirements. b. Use CES to...
Study smarter with the SolutionInn App