Coney Island Entertainment issues $1,300,000 of 7% bonds, due in 15 years, with
ID: 2592512 • Letter: C
Question
Coney Island Entertainment issues $1,300,000 of 7% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year.
Calculate the issue price of a bond and complete the first three rows of an amortization schedule when:
1.
value:
3.33 points
Required information
Required:
1. The market interest rate is 7% and the bonds issue at face amount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors.)
Check my work
2.
value:
3.33 points
Required information
2. The market interest rate is 8% and the bonds issue at a discount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors.)
rev: 08_12_2016_QC_CS-57118
References
Check my work
3.
value:
3.34 points
Required information
3. The market interest rate is 6% and the bonds issue at a premium. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors.)
The balance sheet for Plasma Screens Corporation along with additional information, are provided below:
Additional Information for 2018:
1. Net income is $160,000.
2. The company purchases $200,000 in equipment.
3. Depreciation expense is $80,000.
4. The company repays $75,000 in notes payable.
5. The company declares and pays a cash dividend of $35,000.
Required:
Prepare the statement of cash flows using the indirect method.
PLASMA SCREENS CORPORATIONBalance Sheets
December 31, 2018 and 2017 2018 2017 Assets: Current assets: Cash $ 82,000 $ 120,000 Accounts receivable 72,000 96,000 Inventory 65,000 80,000 Prepaid rent 5,000 4,000 Long-term assets: Land 500,000 500,000 Equipment 800,000 600,000 Accumulated depreciation (380,000) (300,000) Total assets $ 1,144,000 $ 1,100,000 Liabilities and Stockholders' Equity: Current liabilities: Accounts payable $ 78,000 $ 82,000 Interest payable 5,000 9,000 Income tax payable 9,000 7,000 Long-term liabilities: Notes payable 75,000 150,000 Stockholders' equity: Common stock 600,000 600,000 Retained earnings 377,000 252,000 Total liabilities and stockholders' equity $ 1,144,000 $ 1,100,000
Explanation / Answer
Statement of cash flows using the indirect method:
Particulars
Amount ($)
Cash from operating Activities
Net Income
160000
Add: Depreciation
Loss on sale of Land
Interest Paid
Income Tax Expense
80000
Less: Gain on sale of Equipment
Cash Operating activities before working capital adjustments, and taxes
240000
Working Capital Adjustments
Add: Decrease in inventory (80000-65000)
Increase in Accounts Payable
Increase in income tax payable (9000-7000)
Decrease in Accounts Receivable (96000-72000)
15000
2000
24000
Less: Increase in Inventory
Decrease in interest payable (9000-5000)
Increase in prepaid rent (5000-4000)
Decrease in Accounts Payable (82000-78000)
-4000
-1000
-4000
Cash from operating activities before taxes and extraordinary items
272000
Less: Extraordinary loss
Cash From operating activities before taxes
Less: Taxes
Cash from operating activities
Cash from investing activities
Add: Sale of Equipment
Add: Sale of Land
Less: Purchase of Equipment
Less: Retirement of notes payable
Less: Purchase of building
-200000
-75000
Cash from Investing Activities
-275000
Cash from financing Activities
Add: Issue of notes payable
Add: Issue of common stock
Less: Repurchase of own stock
Less: Redemption of bond payable
Less: Cash Dividend paid
Less: Interest Paid
-35000
Cash from financing activities
-35000
Net Increase / decrease in cash
-38000
Opening Cash Balance
120000
Closing Cash Balance
82000
Requirement 1: Period Cash Flow PVF(7/2 = 3.5%) PV of CF 1 to 30 45500 18.39204541 836838.0662 30 1300000 0.356278411 463161.9343 1300000 Requirement 2: Period Cash Flow PVF (8/2 = 4%) PV of CF 1 to 30 45500 17.29203 786787.365 30 1300000 0.308319 400814.7 1187602.065 Requirement 3: Period Cash Flow PVF (6/2 = 3%) PV of CF 1 to 30 45500 19.60044 891820.02 30 1300000 0.411987 535583.1 1427403.12