Nichols Enterprises has an investment in 31,500 bonds of Elliott Electronics that Nichols accounts for as a security available-for-sale. Elliott bonds are publicly traded, and The Wall Street Journal quotes a price for those bonds of $13 per bond, but Nicholsbelieves the market has not appreciated the full value of the Elliott bonds and that a more accurate price is $19 per bond. Nicholsshould carry the Elliott investment on its balance sheet atMultiple CholceEither $409,500 or $598,500, as elther are defensible valuations.$598,500.$409,500.$504,000, the midpolnt of Nichols's range of reasonably likely valuations of Elliott.

Securities-available-for-sale represents the portion of investment made by the company with the…

Answered: Nichols Enterprises has an investment…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
AYE Technologies issued 10-year bonds yesterday at their par value of RM1,000. These bonds pay RM60 in interest every six months, and their price has remained at the RM1,000 issue price. AYE's CFO has determined that the firm needs an additional RM2,000,000, and has decided to issue 10- year, RM1,000 par value bonds that pay only RM40 in interest every six months. If both bonds are to provide investors with the same yield, how many new bonds must AYE issue to raise RM2,000,000? (Ignore the day or two difference between the bonds' issue dates and any bond flotation costs.)
As corporate treasurer, you will purchase K1 million of bonds for the sinking fund in three months you believe rates will soon fall and would like to repurchase the company’s sinking fund bonds, which currently are selling below par, in advance of requirements. Unfortunately, you have to obtain approval from the board of directors for such a purchase, and this could take up to two months. What action can you take in the futures market to hedge any adverse movements in bond yields and prices until you actually can buy the bonds? Will you be long, or short? Why?
You are engaged by a CPA firm to help audit the financial statements of one of its clients, GTE Corporation. GTE is the holder of a bond issued by AT&T, which will mature in 12 years, with a par value of $1,000, and an annual coupon rate of 8%. If the market prevailing interest rate is 9% on the bonds in the same category, the CPA firm asks you to help estimate the value or price of the bond.
An investor has two alternatives: AAA-rated corporate bond or Turkish Government Treasury bond. But the investor is not sure what rate of interest these two bonds should pay. Assume that the real risk-free rate of interest is 1.5%; inflation is expected to be 2.5%; the maturity risk premium is 3.5%; and, the default risk premium for AAA rated corporate bonds is 5.5%. a) What is the "Rate of interest for the AAA-rated corporate bond" ? b) What is the "Rate of interest for the Turkish Government Treasury bond"?
Exam Corp. is in need of cash. On 1/1/2023 Exam Corp. issues bonds with a $350,000 face value. The bonds have an 7.50% coupon rate. The market rate is 18%. The bonds have a life of 6 years, and are compounded semiannually. At the time of issuance, the price of the bonds is correctly calculated to be $218,420. All answers below can be rounded to the nearest dollar. What is the journal entry Exam Corp. will record on 6/30/23? Dr. Interest Revenue $19,658 Cr. Cash $13,125 Cr. Discount $6,533 Dr. Interest Expense $19,658 Cr. Discount $6,592 Cr. Cash $26,250 Dr. Interest Payable $19,658 Cr. Premium $6,592 Cr. Cash $26,250 Dr. Interest Expense $19,658 Cr. Cash $13,125 Cr. Premium $6,533 Dr. Interest Expense $19,658 Cr. Cash $13,125 Cr. Discount $6,533
1
Tanner-UNF Corporation acquired as a long-term investment $290 million of 8% bonds, dated July 1, on July 1, 2021. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $260 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $270 million. Required: 1. & 2. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective (market) rate. 3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2021, balance sheet. 4. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2022, for $250 million. Prepare the journal entries…
When companies offer new debt security issues, they publicize the offerings in the financial press and on Internet sites. Assume the following were among the debt offerings reported in December 2024: New Securities Issues Corporate National Equipment Transfer Corporation-$218 million bonds via lead managers Second Tennessee Bank N.A. and Morgan, Dunavant & Company, according to a syndicate official. Terms: maturity, December 15, 2033; coupon 7.64%; issue price, par; yield, 7.64%; noncallable; debt ratings: Ba-1 (Moody's Investors Service, Incorporated), BBB+ (Standard & Poor's). IgWig Incorporated-$368 million of notes via lead manager Stanley Brothers, Incorporated, according to a syndicate official. Terms: maturity, December 1, 2035; coupon, 6.64%; Issue price, 99; yield, 6.74%; call date, NC; debt ratings: Baa-1 (Moody's Investors Service, Incorporated), A (Standard & Poor's). Required: 1. Prepare the appropriate journal entries to record the sale of both issues to underwriters.…
Lance Whittingham IV specializes in buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond with semiannual payments has 5 percent annual interest and has 20 years remaining to maturity. The current yield to maturity on similar bonds is 14 percent. (Round "PV Factor" to 3 decimal places. Do not round Intermediate calculations. Round the final answers to 2 decimal places.) a. What is the current price of the bonds? Use Appendix B and Appendix D. Current price 530.78 b. By what percent will the price of the bonds increase between now and maturity? Price increases by 88.40 % c. What is the annual compound rate of growth in the value of the bonds? (Use Appendix A) Annual compound rate 4.63 %
Suppose the Federal Reserve sells a $3000 bond, and the reserve ratio maintained by all private banks is 20%. Assume that all loans are fully redeposited (zero “cash drains”) and that all deposits are checkable deposits. Determine the effect of the bond sale on total loans and deposits in the private banks. Explain in detail how these changes would occur. Illustrate the total result of the effects in part (1) using balance sheets for the consolidated private banks and the Federal Reserve, respectively. Discuss how the effects in part (1) would be different if: (i) the reserve ratio was 25% instead of 20%; (ii) a certain portion of loans were held as cash outside banks instead of being redeposited in the banks.
Vikrambhai

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