Ford Motor Company Bonds Accounting Help with Solution

Ford Motor Company Bonds Accounting Help with Solution

 
1.Assume Venture Healthcare sold bonds that have a ten-year maturity, a 12 percent coupon rate with annual payments, and a $1,000 par value.
 
a.Suppose that two years after the bonds were issued, the required interest rate fell to 7 percent. What would be the bond’s value?
 
b. Suppose that two years after the bonds were issued, the required interest rate rose to 13 percent. What would be the bond’s value?
 
c. What would be the value of the bonds three years after issue in each scenario above, assuming that interest rates stayed steady at either 7 percent or 13 percent?
 
 
2.Suppose ford Motor Company sold an issue of bonds with a 10-year maturity, a $1000 par value, a 10% coupon rate, and semiannual interest payments.
 
a.Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell?
 
b. Suppose that, 2 years after the initial offering, the going interest rate has risen to 12%. At what price would the bonds sell?
 
c. Suppose that the conditions in part a existed—that is, interest rates fell to 6% 2 years after the issue date. Suppose further that the interest rate remained at 6 percent for the next 8 years. What would happen to the price of ford Motor Company bonds over time.
 
 
3.Jamestown Electric has a contract with an agency of the federal government to provide electrical power to the agency for a fiveyear period. The contract stipulates, in part, that the power will be provided “at the lowest reasonable cost without compromising safety.” In connection with this contract, Jamestown Electric buys and uses coal from its wholly-owned subsidiary Great Plains Coal Company. The sale of this coal to Jamestown Electric specifically for this contract represents 40 percent of the coal sales for Great Plains. The profit for Great Plains Coal Company during the life of the contract averaged $1.2 million per year. Jed Jones, a former employee of Jamestown Electric was fired by the firm and immediately filed a qui tam suit alleging Jamestown had intentionally overcharged the government throughout the life of the power supply agreement.
 
a. You are the forensic accountant for Jamestown Electric. What are the accounting issues in this case? What are the damages in this case? What documents and other information do you intend to seek? What is the basis for your opinion?
 
 

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4.A travel agency had its highest operating costs in June ($26,250), and its lowest operating costs in November ($21,750). The agency sold 1,500 tickets in June and 900 tickets in November.
 
a. Using the high-low method of cost estimation,
 
compute the fixed and variable components of the travel agency’s monthly operating costs.
 
b. If the travel agency expects to sell 1,900 tickets in December, estimate its operating expenses for December.
 
c. What concerns might arise about making the December operating expense estimate?
 
 
5.Compare Samsung and Apple Ratios to the industry (peer) averages and comment on how they stand when you benchmark the results?
 

Company NameTotal Asset Turnover – 2014Net Profit Margin % – 2014ROE % (Net) – 2014ROA % (Net) – 2014Total Debt to Equity – 2014Interest Coverage – 2014Inventory Turnover – 2014Current Ratio – 2014
Peer Avr: 1.16Peer Avr: 7.44Peer Avr: 17.24Peer Avr: 6.89Peer Avr: 0.16Peer Avr: 3243.48Peer Avr: 14.55Peer Avr: 1.34
Apple Inc0.8421.6133.718.060.3257.941.08
Samsung Electronics Co., Ltd.0.9311.1915.0610.3907.042.21

 

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