18 million of 10 notes are due on a debt covenant

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Fundamentals of Financial Management
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Chapter 16 / Exercise 12B
Fundamentals of Financial Management
Brigham
Expert Verified
3. $18 million of 10% notes are due on March 31, 2015. A debt covenant requires Cordova to maintain current assets at least equal to 150% of its current liabilities. On December 31, 2013, Cordova is in violation of this covenant. Cordova obtained a waiver from Village Bank until June 2014, having convinced the bank that the company's normal 2 to 1 ratio of current assets to current liabilities will be reestablished during the first half of 2014.Required:
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Fundamentals of Financial Management
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Chapter 16 / Exercise 12B
Fundamentals of Financial Management
Brigham
Expert Verified
124.Consider the appropriate classification of these long-term debt obligations. Assuming no more long-term debt will be issued, what are the implications of the information above for Border's liquidity and solvency risk in 2013 and the following years? In its 2013 annual report to shareholders, Border Airlines Inc. presented the following balance sheet information about its liabilities:In addition, Border presented the following among its note disclosures:Maturities of long-term debt (including sinking fund requirements) for the next five years are: 2014 - $421 million; 2015 - $212 million; 2016 - $273 million; 2017 - $1.0 billion; 2018 - $777 million.Required:125.1. Determine the liability for gift certificates to be reported in the December 31, 2013, balance sheet.2. What is the appropriate classification (current or noncurrent) of the liabilities at December 31, 2013? Show calculations. Mozart Music Co. began operations in December of 2013. The company sold gift certificates during December in various amounts totaling $1,600. The gift certificates are redeemable for merchandise within three years of the purchase date. However, experience within the industry predicts that 90% of gift certificates will be redeemed within one year. Certificates totaling $500 were presented for redemption during 2013 as part of merchandise purchases having a total retail price of $750.Required:
In its 2013 annual report to shareholders, the Goodday Chemical Company included the following disclosure note excerpts on CONTINGENCIES in its annual report to shareholders:At December 31, 2013, Goodday had recorded liabilities aggregating $66.5 million for anticipated costs related to various environmental matters, primarily the remediation of numerous waste disposal sites and certain properties sold by Goodday. These costs include legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring and related activities and will be paid over several years. The amount of Goodday's ultimate liability in respect of these matters may be affected by several uncertainties, primarily the ultimate cost of required remediation and the extent to which other responsible parties contribute.At December 31, 2013, Goodday had recorded liabilities aggregating $218.7 million for potential product liability and other tort claims, including related legal fees expected to be incurred, presently asserted against Goodday. The amount recorded was determined on the basis of an assessment of potential liability using an analysis of available information with respect to pending claims, historical experience, and, where available, current trends.

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