Please see the attachment. Chapter 14 Accounting Complete a balance sheet for Bugant, Inc. at December 31, 2012 and an income statement for the year ending December 31, 2011. Assume semi-annual compounding. Analysis Use common ratios for analysis of long-term debt to assess Bugant?s long-run solvency. Has Bugant?s solvency changed much from 2012 to 2012? Bugant?s net income in 2012 was $550 and interest expense was $169.39.

Chapter 14 The following information is taken from the 2012 annual report of Bugant, Inc. Bugant's fiscal year ends December 31 of each year. Bugant's December 31, 2012balance sheet is as follows: Bugant, Inc. December 31 Statement of Financial Position The long term liability note is directly below. Note X: Long Term Debt: On January 1, 2011, Bugant issued bonds with face value of $1,500 and coupon rate equal to 10%. The bonds were issued to yield 12% and mature on January 1, 2016. Additional information concerning 2013 is as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. Sales were $3,500, all for cash. Purchases were $2,000, all paid in cash. Salaries were $700, all paid in cash. Property, plant, and equipment was originally purchased for $2,000 and is depreciated straight line over a 25 year life with no salvage value. Ending inventory was $1,900. Cash dividends of $100 were declared and paid by Bugant. Ignore taxes. The market rate of interest on bonds of similar risk was 16% during all of 2013. Interest on the bonds is paid semi-annually each June 30 and December 31. Accounting Complete a balance sheet for Bugant, Inc. at December 31, 2012 and an income statement for the year ending December 31, 2011. Assume semi-annual compounding. Analysis Use common ratios for analysis of long-term debt to assess Bugant's long-run solvency. Has Bugant's solvency changed much from 2012 to 2012? Bugant's net income in 2012 was $550 and interest expense was $169.39. Principles Recently, the FASB and the IASB allowed companies the option of recognizing in their financial statements the fair-values of their long-term debt. That is, companies have the option to change the balance sheet value of their long-term debt to the debt's fair (or market) value and report the change in balance sheet value as a gain or loss in income. In terms of the qualitative characteristics of accounting information (Chapter 2), briefly describe the potential trade-off(s) involved in reporting long-term debt at its fair value. We Have Assumed And Prepared The Balance Sheet December 31, 2012 And Income Statement December 31, 2013 Bugant, Inc. December 31 Statement of Financial Position Year Assets Cash Inventory Total Current Assets 450 1,800 2,250 Plant, and Equip. Accumulated Dep. Total Assets 2,000 (160) 4,090 Liabilities Bonds Payable (net of discount) 1,426 Equity Common Stock Retained Earnings Total Liabilities & Equity 1,500 1,164 4,090 Long Term Debt Face Value Of Bond Coupon Rate Yield Rate Coupon Amount 2010 1500 10.25% (Compounded Semiannually) 12% 153.75 P.A. As per the information given concering the year 2013, hence we calculated the Income Statement for 2013 instead of 2011 Income Statement As Below Sales Opening Stock Add: Purchases Less: Closing Stock Cost Of Goods Sold Gross Profit Expenses Salaries Depreciation Interest Earnings Before Tax Less: Taxes Earnings After Tax Less: Cash Divididends Earnings Transferred To Balance Sheet $3,500 $2,000 $1,900 $100 $3,400 $700 $80 $154 $2,466 0 (Taxes To Be Ignored) $2,466 $1,000 $1,466 Bugants solvency has changed from 2012 to 2012. As the balance sheet for 2012 is given we have not calcualted the same. We Have Assumed And Prepared The Balance Sheet December 31, 2012 And Income Statement December 31, 2013 Bugant, Inc. December 31 Statement of Financial Position Year Assets Cash Inventory Total Current Assets 450 1,800 2,250 Plant, and Equip. Accumulated Dep. Total Assets 2,000 (160) 4,090 Liabilities Bonds Payable (net of discount) 1,426 Equity Common Stock Retained Earnings Total Liabilities & Equity 1,500 1,164 4,090 Long Term Debt Face Value Of Bond Coupon Rate Yield Rate Coupon Amount 2010 1500 10.25% (Compounded Semiannually) 12% 153.75 P.A. As per the information given concering the year 2013, hence we calculated the Income Statement for 2013 instead of 2011 Income Statement As Below Sales Opening Stock Add: Purchases Less: Closing Stock Cost Of Goods Sold Gross Profit Expenses Salaries Depreciation Interest Earnings Before Tax Less: Taxes Earnings After Tax Less: Cash Divididends Earnings Transferred To Balance Sheet $3,500 $2,000 $1,900 $100 $3,400 $700 $80 $154 $2,466 0 (Taxes To Be Ignored) $2,466 $1,000 $1,466 Bugants solvency has changed from 2012 to 2012. As the balance sheet for 2012 is given we have not calcualted the same