Fore Ever Yours, Inc., a manufacturer of wedding rings, issued two financial instruments at the beginning of
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Fore Ever Yours, Inc., a manufacturer of wedding rings, issued two financial instruments at the beginning of 2008: a \($10\) million, 40-year bond that pays interest at the rate of 11% annually and 10,000 shares of \($100\) preferred stock that pays a dividend of 7.5% annually. The preferred stock has a mandatory redemption feature that requires the company to repurchase all outstanding shares at par (\($100\) per share) in 40 years.
Required:
Describe how each financial instrument will affect the company’s balance sheet and income statement in 2008.
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