Coney Island Entertainment issues $1,300,000 of 7% bonds, due in 15 years, with

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 CORPORATION
Balance 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

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