Question

Thrillville has $40.7 million in bonds payable. One of the contractual agreements in the bond is that the debt to equity ratio cannot exceed 2.0. Thrillville’s total assets are $80.7 million, and its liabilities other than the bonds payable are $10.7 million. The company is considering some additional financing through leasing.

Required:
1. Calculate total stockholders' equity using the balance sheet equation. (Enter your answer in millions rounded to 1 decimal place. (i.e., $5,500,000 should be entered as 5.5).)

2. Calculate the debt to equity ratio. (Enter your answer in millions. (i.e., $5,500,000 should be entered as 5.5). Round ratio answer to 2 decimal places.)

3. The company enters a lease agreement requiring lease payments with a present value of $15.7 million. Record the lease. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answer in millions (i.e., $5,500,000 should be entered as 5.5.).)

Answer 1

Solution:

Required 1: Stockholders' equity using the balance sheet equation.

Details	Amount($)
Total assets	$80.7
Less:  liabilities	($10.7)
Less: Bonds payable	($40.7)
Total Stockholders' equity	$29.3

Required 2:  

Debt to equity ratio = Total liabilities / Total equity

Total liabilities = $10.7 + $40.7

= $51.4

Now,

Debt to equity ratio = $51.4 / $29.3

= 1.75

Debt to equity ratio = 1.75

Note:

As per HomeworkLib guidelines i am answered only 2 questions. please upload remaining as another.

I hope you can understand my restrictions. Feel free to ask if you have any doubt.

Thank you.