Answer:
Determine whether the following bonds payable will be issued at face value, at a premium, or at a discount:
a.The market interest rate is 8%. Idaho issues bonds payable with a stated rate of 7.75%.
- Bonds issued at discount because market rate is higher than the bond's coupon rate.
b.Austin issued 9% bonds payable when the market interest rate was 8.25%.
- Bonds issued at premium because market rate is lower than the bond's coupon rate.
c.Cleveland's Cars issued 10% bonds when the market interest rate was 10%.
- Bonds issued at par because bond's coupon rate is equal to the market rate.
d.Atlanta's Tourism issued bonds payable that pay the stated interest rate of 8.5%. At issuance, the market interest rate was 10.25%.
- Bonds issued at discount because market rate is higher than the bond's coupon rate.
Answer:
The correct answer is B
Explanation:
The checks which are there on the accuracy of the statements are:
1. The corporation needed to hire or require the neutral party, which is known as the auditor in order to check the annual financial statements of the company, and also ensures that the financial statements are to prepared as per GAAP (generally accepted accounting principles). It should also offer the evidence to support the information reliability.
2. The public companies need to use a common or general set of rules and the standard format while making the reports.
3. The role of auditor is to review the financial statements and in addition Sarbanes-Oxley Act requires the CFO as well as CEO to attest personally to the accuracy of the financial statements.
Answer:
a. Ada defaults on the note.
Explanation:
An agency can be defined as a mutual relationship existing between two parties, wherein a principal authorizes the agent to act as the principal's representative or on his behalf (fiduciary role) in dealing with third parties.
The parties entering into a contractual agreement are obligated to terminate an agency relationship by placing into the agreement a time period specifying the termination. Thus, when that time elapses or expires, the agency between the parties involved ends. Furthermore, the parties involved may specify the particular purpose for which the agency is established. Once that purpose is achieved, the agency is terminated or ends.
This ultimately implies that, the legal entity or secondary liability (trustee or licensee) would be held responsible for the losses, legal claims and damages incurred by its partner in an agency, whether or not the agent's actions were authorized or unauthorized by the principal.
In this scenario, Ada is the maker of a note, on which Bart is secondarily liable. Also, the current holder of the note is Credit Instruments Company.
Since Bart is secondarily liable to Ada, it will be obligated to pay for any of the notes if Ada defaults on the them.
Hence, a trustee is liable for acts or contracts entered into by an agent when he or she gives an agent either actual authority (power of attorney) or apparent authority.
Answer:
a.
The WACC is 9.4875%
b.
The after tax cost of debt is 3.25%
Explanation:
The WACC or Weighted average cost of capital is the cost to a firm of its capital structure based on the weighted average of costs of all the components that form up its capital structure. The components in a firm's capital structure are debt, preferred stock and common stock.
WACC = wD * rD * (1-tax rate) + wP * rP + wE * rE
Where,
- w represents the weight of each component in the overall capital structure
- r represents the cost of each component
- we multiply the cost of debt by (1 - tax rate) to take the after tax cost of debt
a.
WACC = 0.15 * 0.05 * (1-0.35) + 0.15 * 0.04 + 0.7 * 0.12
WACC = 0.094875 or 9.4875%
b.
The after tax cost of debt is calculated by multiplying the cost of debt or rD by (1 - tax rate).
After tax cost of debt = 0.05 * (1 - 0.35) = 0.0325 or 3.25%
