1. Would a zero-coupon bond ever sell for its face amount?
2. Bonds Payable has a balance of $750,000, and Discount on Bonds Payable has a balance of $12,500. If the issuing corporation redeems the bonds at 99, is there a gain or loss on the bond redemption?
3. When should the liability associated with a product warranty be recorded? Discuss.
4. Hewlett-Packard reported $1,494 million of product warranties in the current liabilities section of a recent balance sheet. How would costs of repairing a defective product be recorded?
5. How would you interpret a four-year trend in the current ratio, which has declined from 2.0 to 0.50?
6. What is the number of times interest charges are earned if the business has net income before taxes of $600,000 and a $1,500,000 face value bond payable with a coupon rate of 10%?