Chapter 10 Questions 1, 7, 8, And 19

Chapter 10 Questions 1 7 8 And 19question 1georgia Lazenby Believ

Chapter 10: Questions 1, 7, 8, and 19 Question 1: Georgia Lazenby believes a current liability is a debt that can be expected to be paid in one year. Is Georgia correct? Explain. Question 7: (a) What are long-term liabilities? Give two examples. (b) What is a bond? Question 8: Contrast these types of bonds: (a) Secured and unsecured. (b) Convertible and callable. Question 19: Valentin Zukovsky says that liquidity and solvency are the same thing. Is he correct? If not, how do they differ? Chapter 10: Exercise Brief Exercise BE 10-1 BE10-1 Kananga Company has these obligations at December 31: (a) a note payable for $100,000 due in 2 years, (b) a 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments, (c) interest payable of $15,000 on the mortgage, and (d) accounts payable of $60,000. For each obligation, indicate whether it should be classified as a current liability. Chapter 10: Financial Reporting Problem: BYP10-1 FINANCIAL REPORTING PROBLEM: Tootsie Roll Industries BYP10-1 Refer to the financial statements of Tootsie Roll Industries and the Notes to Consolidated Financial Statements in Appendix A. (I need to find this) Instructions Answer the following questions. (a) What were Tootsie Roll’s total current liabilities at December 31, 2004? What was the increase/decrease in Tootsie Roll’s total current liabilities from the prior year? (b) How much were the accounts payable at December 31, 2004? (c) What were the components of total current liabilities on December 31, 2004 (other than accounts payable already discussed above)? Chapter 11: BYP11-10 Greenwood Corporation has paid 60 consecutive quarterly cash dividends (15 years). The last 6 months have been a real cash drain on the company, however, as profit margins have been greatly narrowed by increasing competition. With a cash balance sufficient to meet only day-to-day operating needs, the president, Gil Mailor, has decided that a stock dividend instead of a cash dividend should be declared. He tells Greenwood’s financial vice-president, Vicki Lemke, to issue a press release stating that the company is extending its consecutive dividend record with the issuance of a 5% stock dividend. “Write the press release convincing the stockholders that the stock dividend is just as good as a cash dividend,†he orders. “Just watch our stock rise when we announce the stock dividend; it must be a good thing if that happens.†Instructions (a) Who are the stakeholders in this situation? (b) Is there anything unethical about president Mailor’s intentions or actions? (c) What is the effect of a stock dividend on a corporation’s stockholders’ equity accounts? Which would you rather receive as a stockholder—a cash dividend or a stock dividend? Why? 5. Consider the following probability distribution of returns estimated for a proposed project that involves a new ultrasound machine: State of Economy Probability of Occurrence Rate of Return Very Poor 0..0% Poor 0.20 0.0% Average 0..0% Good 0.20 20.0% Very Good 0..0% 1. What is the expected rate of return on the project? 2. What is the project’s standard deviation of returns? 3. What is the project’s coefficient of variation (CV) of returns? 4. What type of risk does the standard deviation and CV measure? 5. In what situation is the risk relevant?

Paper For Above instruction

The chapter 10 questions encompass fundamental concepts in accounting and finance that are crucial for understanding liabilities, bonds, and financial analysis. Georgia Lazenby’s assertion that a current liability is a debt payable within one year is partially correct but requires nuanced understanding. In accounting, a current liability is a financial obligation due within one year or within the entity’s operating cycle, whichever is longer. Therefore, her definition holds under typical conditions but must also consider the entity's operating cycle, which may extend beyond one year in some cases (Kieso, Weygandt, & Warfield, 2019).

Long-term liabilities are obligations not expected to be settled within one year, which include items such as bonds payable and long-term notes payable. Bonds are debt securities issued by corporations to raise capital, representing a formal promise to pay principal and interest over a specified period (Brigham & Ehrhardt, 2016). They serve as critical financing tools, providing companies with necessary funds while offering investors a steady income stream and security through various bond features.

Contrasting bonds, secured and unsecured bonds differ primarily in their collateral backing; secured bonds are backed by specific assets, providing bondholders with higher security in case of default. Unsecured bonds, or debentures, lack collateral, making them riskier but often offering higher yields (Geddes, 2017). Convertible bonds allow bondholders to convert their bonds into a predetermined number of shares, offering potential upside if the company's stock appreciates, whereas callable bonds can be redeemed by the issuer before maturity, usually at a premium, providing flexibility to the issuer but risk to investors (Fabozzi, 2018). These features influence bond valuation, attractiveness, and risk profiles.

Valentin Zukovsky’s statement that liquidity and solvency are the same is incorrect; they represent related but distinct concepts. Liquidity refers to a company's ability to meet short-term obligations as they mature, emphasizing cash flow and liquid assets, while solvency pertains to the overall financial stability and whether a company has enough assets to cover all its liabilities (White, Sondhi, & Fried, 2015). A solvent company may not be liquid at a given moment, underscoring the importance of understanding both metrics in financial analysis.

The exercise involving Kananga Company illustrates classifications of liabilities at a specific point in time. A note payable due in two years and a mortgage payable with payments scheduled over ten years are classified as non-current liabilities, given they are due after one year. Conversely, interest payable and accounts payable are current liabilities due within the upcoming accounting period (Weygandt, Kieso, & Kimmel, 2020).

Financial reporting analysis of Tootsie Roll Industries’ liabilities requires examining the company's balance sheet disclosures. The total current liabilities include items such as accounts payable, accrued expenses, and short-term obligations. Changes from previous periods offer insights into liquidity management and operational efficiency (Wild, Subramanyam, & Halsey, 2019).

Greenwood Corporation’s decision to issue a stock dividend instead of cash dividend raises ethical and strategic considerations. Stakeholders encompass stockholders, management, employees, and regulators. Issuing a stock dividend, especially as a means to preserve cash during financial strain, may be viewed as a way to maintain dividend traditions without distributing cash, potentially misleading investors about company performance (Healy & Palepu, 2018). The impact on stockholders’ equity involves transferring amounts from retained earnings to paid-in capital, diluting earnings per share but preserving equity value (Schroeder, Clark, & Cathey, 2020). Personally, I would prefer a cash dividend, preferring immediate liquidity over potential future stock appreciation, but this depends on individual investment strategies.

The probability distribution for the ultrasound project demonstrates the calculation of expected returns and risk measures. The expected rate of return is computed as the weighted average of possible returns across states of the economy, considering their probabilities. Standard deviation quantifies the variability in returns, serving as a measure of total risk, while the coefficient of variation normalizes this risk relative to the mean return (Bodie, Kane, & Marcus, 2014). These risk metrics are relevant in investment decisions, enabling comparison of risk-return trade-offs conveniently (Damodaran, 2012).

References

• Bodie, Z., Kane, A., & Marcus, A. J. (2014). Investments (10th ed.). McGraw-Hill Education.
• Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice (15th ed.). Cengage Learning.
• Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset (3rd ed.). Wiley.
• Fabozzi, F. J. (2018). Bond Markets, Analysis and Strategies (10th ed.). Pearson.
• Geddes, R. (2017). Bond Pricing and Yield Analysis. Journal of Financial Markets, 34, 70-86.
• Healy, P. M., & Palepu, K. G. (2018). Business Analysis & Valuation: Using Financial Statements (6th ed.). Cengage Learning.
• Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting (16th ed.). Wiley.
• Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2020). Financial Accounting Theory and Analysis (13th ed.). Wiley.
• White, G. I., Sondhi, A. C., & Fried, D. (2015). The Analysis and Use of Financial Statements (3rd ed.). Wiley.
• Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. (2020). Financial Accounting (11th ed.). Wiley.