ACCT 200 1st Edition Lecture 19 Outline of Last Lecture I Types of Bonds II Bonds Offered at a Discount III E 9 4 IV BE 9 9 Outline of Current Lecture I BE 9 9 II BE 9 10 III Installment Notes IV BE 9 17 V E 9 16 VI Selling Stocks Vs Bonds VII BE 9 18 Current Lecture BE 9 9 Cash 55 786 bond payable 55 786 Interest expense 3905 55 786 7 bond payable cash 305 3600 60 000 6 bond sold at discount BE 9 10 bond sold at premium Cash 64 633 bonds payable 64 633 Interest expense 3232 Bond payable 368 cash 3600 60 000 6 Installment notes Make regular installment payments like car loan Each month pay 1 12 of annual interest rate BE 9 17 Cash 20 000 note payable 20 000 Interest expense 116 67 Note payable cash 362 25 478 92 E 9 16 1st month Interest expense Note payable cash 200 40 000 6 1 12 573 31 773 31 new principle balanace 40 000 573 31 39 426 69 2nd month Interest expense Note payable cash 197 13 39 426 69 6 1 12 576 18 773 31 Sell stock to investors don t owe them anything Selling bonds creates debt Why wouldn t a company always sell stock More stock you sell more owners mess up earnings per share ratio which makes your company not look as good BE 9 18 1 Debt to equity 618 129 4 79 for every 1 in equity they have 4 79 in debt seems high 2 Times interest earned net income tax expense interest expense interest expense 56 34 17 17 107 17 6 3 times pretty good
View Full Document
Unlocking...