Note X: Long Term Debt:

On January $1,2024,$ Bugant issued bonds with face value of $$1,500$ and a coupon rate equal to $10\%.$ The bonds were issued to yield $12\%$ and mature on January $1,2029.$

Additional information concerning $2026$ is as follows.

$1-$Sales were $$3,500,$ all for cash.

$2-$Purchases were $$2,000,$ all paid in cash.

$3-$Salaries were $$700,$ all paid in cash.

$4-$Property, plant, and equipment was originally purchased for $$2,000$ and is depreciated straight$-$line over a $25-$year life with no salvage value.

$5-$ Ending inventory was $$1,900.$

$6-$ Cash dividends of $$100$ were declared and paid by Bugant.

$7-$Ignore taxes.

$8-$The market rate of interest on bonds of similar risk was $12\%$ during all of $2026.$

$9-$Interest on the bonds is paid semiannually each June $30$ and December $31.$

Instructions:

Accounting

Prepare a balance sheet for Bugant, Inc. at December $31,2026,$ and an income statement for the year ending December $31,2026.$ Assume semiannual compounding of the bond interest.

Analysis

Use common ratios for analysis of long$-$term debt to assess Bugant$$s long$-$run solvency. Has Bugant$$s solvency changed much from $2025$ to $2026?$ Bugant$$s net income in $2025$ was $$550$ and interest expense was $$169.$