Accounting 382 Project
Autor: Dantong Shan • June 6, 2016 • Term Paper • 2,708 Words (11 Pages) • 954 Views
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ACTG 382 Project 2
- Consider the various types of debt described in Note 13, Indebtedness and Credit Agreement.
- Secured versus unsecured debt
- The total secured debt is $3,350,367,000 at February 28, 2015. The total unsecured debt is $2,202,583,000 at February 28, 2015 (guaranteed unsecured debt plus unguaranteed unsecured debt)..
- Unsecured debt is a loan not backed by an asset, but the enterprises creditworthiness. The lender evaluates a consumer’s credit history before making a loan. Secured debt is a loan backed by an asset. The asset is then forfeited if the loan is defaulted on..
- The company’s ability to borrow under the revolver is based upon a specified borrowing base consisting of accounts receivable, inventory and prescription files.
- The reason why Rite Aid distinguish between these two types of debt is that secured and unsecured debts will influence the interest.
- Guarantee is an agreement or promise to answer for the debt if another in case that person defaults. Substantially all of Rite Aid Corporation’s 100 percent owned subsidiaries guarantee the obligations.
- Senior means the debt holders have priority in the company is unable to pay the creditor back. Fixed rate means the interest rate of debt will not change over the term of the debt. Convertible is bond which can be converted to other securities under certain conditions.
- Rite Aid has many different types of debt with a range of interest rates because it is able to help them increase the credit. Higher credit rating is beneficial to the Rite Aid. They will have higher risks if they attach all debts to assets.
- Consider Note 13, Indebtedness and Credit Agreement.
- The total debt Rite Aid has as February 28,2015 is $5,644,943,000.
- Current maturities of long-term debt and lease financing obligation is $100,376,000, so $100,376,000 is due within the coming fiscal year.
Balance Sheet | Note 13 | |
Secured debt | $3,350,367,000 | |
Leasing financing obligation | $61,152,000 | $91,993,000 |
Unsecured debt | $2,202,583,000 | |
Long-term debt | $5,483,415,000 | |
Other noncurrent liabilities | $776,629,000 | |
Less: current debt | $100,376,000 | |
Total | $6,321,196,000 | $5,544,567,000 |
- Consider the 8% senior secured notes due August 2020.
- The face value of 8% senior secured notes due August 2020 is $650,000,000.
- Dr Cash 650,000,000
Cr Bonds payable 650,000,000
- Dr Interest Expense 52,000,000
Cr Cash 52,000,000
- Dr Bonds Payable 650,000,000
Cr Cash 650,000,000
- Consider the 9.25% senior notes due March 2020. Assume that interest is paid annually.
- Face value=902,000,000
Carrying value=905,415,000
The values are different because the discount rate less than the coupon rate for the note, therefore the initial carrying value of the loan was larger than face value.
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