finance Fridley Manufacturing’s accounting records reveal the following account balances after adjusting entries are made on December 31, 2020:
Accounts payable| $62,500 ||Interest payable|$38,700
Bonds payable (9.4%, due in 2027) |800,000 ||Installment note payable (8%, equal installments due 2021 to 2024)| 120,000
Lease liability* |41,500 ||Notes payable (7.8%, due in 2025)| 400,000
Bonds payable (8.7%, due in 2023) |50,000 ||Premium on notes payable (7.8%, due in 2025) |6,100
Deferred tax liability*| 133,400 ||Note payable, 4% $50,000 face amount, due in 2026 (net of discount) 31,900
Discount on bonds payable (9.4%, due in 2027) |12,600
Income taxes payable |26,900
\* Long-term liability
Prepare the current liabilities and long-term debt portions of Fridley’s balance sheet at December 31, 2020. Provide a separate line item for each issue (do not combine separate bonds or notes
payable), but some items may need to be split into more than one item. question Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions.
In this chapter, we described how to estimate a company's WACC, which is the weighted average of its costs of debt, preferred stock, and common equity. Most of the data we need to do this can be found from various data sources on the Internet. Here we walk through the steps used to calculate Minnesota Mining \& Manufacturing's (MMM) WACC.
As a first step, we need to estimate what percentage of MMM's capital comes from debt, preferred stock, and common equity. This information can be found on the firm's latest annual balance sheet. (As of year end $2014$ , MMM had no preferred stock.) Total debt includes all interest-bearing debt and is the sum of short-term debt and long-term debt.
a. Recall that the weights used in the WACC are based on the company's target capital structure. If we assume that the company wants to maintain the same mix of capital that it currently has on its balance sheet, what weights should you use to estimate the WACC for MMM?
b. Find MMM's market capitalization, which is the market value of its common equity. Using the sum of its shortterm debt and long-term debt from the balance sheet (we assume that the market value of its debt equals its book value) and its market capitalization, recalculate the firm's debt and common equity weights to be used in the WACC equation. These weights are approximations of market-value weights. Be sure not to include accruals in the debt calculation. 13th Edition•ISBN: 9780135225691 (1 more)Michael R Solomon 6th Edition•ISBN: 9780357041178Spencer A. Rathus 7th Edition•ISBN: 9781259314728Jean Williams, Vikki Krane 8th Edition•ISBN: 9781337619370David Barlow, Stefan Hofmann, V Durand