Problem
RadioShack's 2011 Form 10-K discusses RadioShack's issuance of the "2019 Notes", which are called the "bonds" in the questions below.
What is the stated interest rate on the bonds?
What is the effective interest rate on the bonds?
Why is there a difference between these two numbers?
What is the face amount of the bonds outstanding?
Is the face amount of the bonds reflected on the balance sheet as a liability at 12/31/11? Why or why not?
Calculate the total cash interest payable to the bondholders in calendar 2012.
Will the interest expense on these bonds in the 2012 income statement be greater than, equal to, or less than the cash interest paid to the bondholders in 2012? How do you know?