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# Bonds payable of Solomon Sales Co.

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Bonds payable:

On January 1, 2005, Solomon Sales Co. issued zero coupon bonds with a face value of \$6 million for cash. The bonds mature in 10 years and were issued at a price of \$3,050,100.

a. Required: What is the annual effective interest rate in the market when the bonds were issued?

b. Required: What amount of interest expense on these bonds would Solomon Sales Co. report in its 2006 income statement?

c. Required: How much interest will Solomon Sales Co. pay on these bonds in 2007?

d. Required: What will Solomon Sales Co. report as the total carrying value of these bonds in its December 31, 2008, balance sheet?

e. Required: What total interest expense will Solomon Sales Co. report over the 10-year life of these bonds?

#### Solution Preview

Bonds payable:

On January 1, 2005, Solomon Sales Co. issued zero coupon bonds with a face value of \$6
million for cash. The bonds mature in 10 years and were issued at a price of \$3,050,100.

a. Required: What is the annual effective interest rate in the market when the bonds were
issued?

A zero-coupon bond is a bond that is bought at a deep discount from its face value. It pays zero annual interest during its life, but pays full face value on its maturity date.

In order to find the annual effective interest rate in the market, you need to find the use present value equation as follows: ...

#### Solution Summary

This solution is comprised of a detailed explanation and calculation to answer the request of the assignment of bonds payable of Solomon Sales Co.

\$2.19

## The company of this research is Nike

The Company on this research is NIKE.....Everything on this research need to be from Nike the shoe company...

Write a very brief introduction indicating why you chose this particular company. Provide a brief summary of the company's history and the type of business and industry it is in. Analyze the company's operations and forecast for the next 3 to 5

a. fiscal years' sales and earnings AND STOCK PRICE.

Obtain each of the company's various reports. You can call the company's treasurer or investor relations office and ask for the reports. Read each report and briefly analyze the company on the basis of these reports. Available reports may include the Annual Report, 10K, Quarterly Report (10Q), Prospectus, Proxy Statement for Annual Meeting, Press Releases and Financial Analysts' Reports.

4. Obtain current reports in Value Line (basic & expanded volumes), Moody's S&P's and from a securities brokerage firm. Read and analyze each report. What is YOUR analysis of the company based on reading the reports? Does your opinion of the company differ from the reports? What accounts for the difference? Your conclusions based on your analysis is most important.

5. Keep daily or weekly stock prices on your company for nine weeks. Also keep track of a stock index--Dow Jones Index, NYSE Index or S&P 500 Index for the same period. At the end of the nine weeks, calculate the rate of return on the stock and on the Index over the period.

6. BE BRIEF, CONCISE, TO THE POINT. In order to make a forecast of next year's sales, earnings and stock price you will have to answer the following questions or consider the following issues AT A MINIMUM:

7. What is the company's RISK? What does the beta tell you

a. about the riskiness of the stock? How does the company's

b. beta compare to the beta of other companies in the industry?

c. Value Line?

8. What type of stocks, bonds, options and warrants does the

a. company have? Give specifics--class, date, maturity, coupon

b. rate, outstanding volume, authorized, etc. What are the

c. ratings of the bonds?

9. What kind of capital structure does the company have (Debt

a. to Equity %)? Can you tell whether it is typical of the

b. industry or different? Has the company ever been in a

c. Why, and what was the outcome?

d. What was the capital structure before and after Chapter 11?

10. Various ratios relate the internal performance of the firm

a. to the external judgment of the market place in terms of

i. value.

b. What is the book value and market value of the company?

c. What is the price-to-book ratio of the company?

i. What is the price-to-market ratio of the market?

ii. Check Value Line publication in library?

d. Do a trend analysis (five years) of at least five

1. important ratios.

ii. Analyze the company's liquidity and profitability position.

iii. Do a trend analysis (five years) of the sales, earnings & price of the company.

e. From the above, compare the most recent year's ratios

i. for your company to the ratios for the industry.

ii. How does the company compare? Is this good or bad?

11. Does the company pay a dividend?

a. If so, what has been the growth rate?

b. Does the company have a dividend reinvestment plan?

c. What is the company's past history of dividends?

d. Is there a trend?

12. Has the company ever had stock splits or stock dividends?

a. If so, what was the probable reason?

b. Check the Value Line graph.

13. Does the company have treasury stock?

a. How Much?

b. Check the balance sheet.

14. Has the company ever been involved in merger activity?

i. What transpired?

15. What are the amounts of the top salaries for the executive officers?

a. Is there a relationship between the top executive's salary, the number of years he has been with the firm and the number of shares of stock that he own?

b. Do you think the number of shares he owns seem high or low? Discuss.

c. What percentage of shares are owned by insiders?

d. Check Value Line.

16. Find two current articles on the company in Forbes, Fortune,

a. Business Week, The Wall Street Journal, Barrons or The Economist. Briefly

b. summarize the two articles in your report.

17. Obtain a copy of a research report on your company. It is generally available from one of the retail security brokerage firms. You may have to call the brokerage firm's research department.

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