On the last day of its fiscal year ending December 31, 2018, the
Sedgwick & Reams (S&R) Glass Company completed two
financing arrangements. The funds provided by these initiatives
will allow the company to expand its operations. (FV of $1, PV of
$1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
1. S&R issued 9% stated rate bonds with a face amount of $100
million. The bonds mature on December 31, 2036 (20 years). The
market rate of interest for similar bond issues was 10% (5.0%
semiannual rate). Interest is paid semiannually (4.5%) on June 30
and December 31, beginning on June 30, 2019.
2. The company leased two manufacturing facilities. Lease A
requires 20 annual lease payments of $210,000 beginning on January
1, 2019. Lease B also is for 20 years, beginning January 1, 2019.
Terms of the lease require 17 annual lease payments of $230,000
beginning on January 1, 2022. Generally accepted accounting
principles require both leases to be recorded as liabilities for
the present value of the scheduled payments. Assume that an 11%
interest rate properly reflects the time value of money for the
lease obligations.
Required:
What amounts will appear in S&R's December 31, 2018, balance
sheet for the bonds and for the leases? (Enter your answers
in whole dollars. Do not round intermediate calculations. Round
your final answers to nearest whole dollar amount.)
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| Bond
liability |
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| Lease A
liability |
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| Lease B liability |
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