Homework Solutions  
» Home
  

See All Homework
Questions here

Question Description

 
Posted by: Homeworkhelp
Price Quoted by Student: $4
Posted On: 2011-03-11 12:12:44
 
Question

Problem 14-9A On January 1, 2005, Wildcat Company issues at par its 11%, four-year bonds with

 

Problem 14-9A Ratio of pledged assets to secured liabilities

 

Fundamental Accounting Principles, 17th ed  Larson Wild Chiappetta:

 

ANSWER KEY Problem 14-9A On January 1, 2005, Wildcat Company issues at par its 11%, four-year bonds with a $135,000

 

Problem 14-9A On January 1, 2005, Wildcat Company issues at par its 11%, four-year bonds with a $135,000 par value. They are secured by a mortgage that specifies assets totaling $225,000 as collateral. Also on January 1, 2005, Athens Company issues at par its 11%, four-year bonds with a par value of $60,000. Athens secures its bonds with a mortgage that includes $150,000 of pledged assets. The December 31, 2004, balance sheet information for both companies follows:

 

Wildcat Co.     Athens Co.

Total assets . . . . . . . . . . . . . . . . . $900,000* $450,000†

Liabilities

Secured . . . . . . . . . . . . . . . . . .            $210,000         $ 75,000

Unsecured . . . . . . . . . . . . . . . .           150,000           165,000

Equity . . . . . . . . . . . . . . . . . . .            540,000           210,000

Total liabilities and equity . . . .            $900,000         $450,000

* 43% are pledged. †54% are pledged.

 

Required

1. Compute the ratio of pledged assets to secured liabilities for each company at January 1, 2005.

 

Analysis Component

2. Which company’s bonds appear less risky? What other information might help to evaluate the risks of these companies’ bonds?


Solutions
ANSWER KEY Problem 14-9A On January 1, 2005, Wildc
Price $4
Attachment 1: P14-9A Wildcat Company issues.doc
Solution Posted By: Homeworkhelp    Posted on: 11-03-2011