Refer to Note 20, Financial Instruments.h.iWhat is the fair-value of Rite Aid's fixed-rate debt at February 28, 2004? Why does it differfrom the carrying amount?What is the fair-value of the variable-rate debt at February 28, 2004? Why does it not differfrom its carrying amount?iiiiiWhy would financial statement users want to know the fair-value of Rite Aid's debt? 20. Financial InstrumentsThe carrying amounts and fair values of financial instruments at February 28, 2004 and March 1,2003 are listed as follows:20032004FairValueCarryingAmountFairValueCarryingAmount$1,150,000 $1,150,000 $1,372,500 $1,372,500$2,558,497 $2,640,995 $2,313,942 $2,027,603Variable rate indebtednessFixed rate indebtedness .Cash, trade receivables and trade payables are carried at market value, which approximates theirfair values due to the short-term maturity of these instrumentsThe following methods and assumptions were used in estimating fair value disclosures forfinancial instruments:LIBOR-based borrowings under credit facilities:The carrying amounts for LIBOR-based borrowings under the credit facilities, term loans andterm notes approximate their fair values due to the short-term nature of the obligations and thevariable interest ratesLong-term indebtedness:The fair values of long-term indebtedness is estimated based on the quoted market prices of thefinancial instruments. If quoted market prices were not available, the Company estimated the fairvalue based on the quoted market price of a financial instrument with similar characteristics

Question
Asked Nov 17, 2019
43 views

see attached pictures for questions

Refer to Note 20, Financial Instruments.
h.
i
What is the fair-value of Rite Aid's fixed-rate debt at February 28, 2004? Why does it differ
from the carrying amount?
What is the fair-value of the variable-rate debt at February 28, 2004? Why does it not differ
from its carrying amount?
ii
iii
Why would financial statement users want to know the fair-value of Rite Aid's debt?
help_outline

Image Transcriptionclose

Refer to Note 20, Financial Instruments. h. i What is the fair-value of Rite Aid's fixed-rate debt at February 28, 2004? Why does it differ from the carrying amount? What is the fair-value of the variable-rate debt at February 28, 2004? Why does it not differ from its carrying amount? ii iii Why would financial statement users want to know the fair-value of Rite Aid's debt?

fullscreen
20. Financial Instruments
The carrying amounts and fair values of financial instruments at February 28, 2004 and March 1,
2003 are listed as follows:
2003
2004
Fair
Value
Carrying
Amount
Fair
Value
Carrying
Amount
$1,150,000 $1,150,000 $1,372,500 $1,372,500
$2,558,497 $2,640,995 $2,313,942 $2,027,603
Variable rate indebtedness
Fixed rate indebtedness .
Cash, trade receivables and trade payables are carried at market value, which approximates their
fair values due to the short-term maturity of these instruments
The following methods and assumptions were used in estimating fair value disclosures for
financial instruments:
LIBOR-based borrowings under credit facilities:
The carrying amounts for LIBOR-based borrowings under the credit facilities, term loans and
term notes approximate their fair values due to the short-term nature of the obligations and the
variable interest rates
Long-term indebtedness:
The fair values of long-term indebtedness is estimated based on the quoted market prices of the
financial instruments. If quoted market prices were not available, the Company estimated the fair
value based on the quoted market price of a financial instrument with similar characteristics
help_outline

Image Transcriptionclose

20. Financial Instruments The carrying amounts and fair values of financial instruments at February 28, 2004 and March 1, 2003 are listed as follows: 2003 2004 Fair Value Carrying Amount Fair Value Carrying Amount $1,150,000 $1,150,000 $1,372,500 $1,372,500 $2,558,497 $2,640,995 $2,313,942 $2,027,603 Variable rate indebtedness Fixed rate indebtedness . Cash, trade receivables and trade payables are carried at market value, which approximates their fair values due to the short-term maturity of these instruments The following methods and assumptions were used in estimating fair value disclosures for financial instruments: LIBOR-based borrowings under credit facilities: The carrying amounts for LIBOR-based borrowings under the credit facilities, term loans and term notes approximate their fair values due to the short-term nature of the obligations and the variable interest rates Long-term indebtedness: The fair values of long-term indebtedness is estimated based on the quoted market prices of the financial instruments. If quoted market prices were not available, the Company estimated the fair value based on the quoted market price of a financial instrument with similar characteristics

fullscreen
check_circle

Expert Answer

Step 1

i)

 

The fair value of the fixed rate debt at February 28, 2004 is $2,640,995, as since this represents quoted market value of the financial instruments which are similar unlike the carrying amount.

Step 2

ii)

 

The fair value of the variable rate debt at February 28, 2004 is $1,150,000, and this is different from the carrying amount due to the various changes ...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Other

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Bridgeport Corp. uses a periodic inventory system. Its records show the following for the month of M...

A: Calculate the weighted average unit cost:

question_answer

Q: Keesha Co. borrows $200,000 cash on November 1, 2018, by signing a 90-day, 9% note with a face value...

A: Since we are entitled to answer up to 3 sub-parts, we’ll answer the first 3 schedules. Please resubm...

question_answer

Q: When taxpayers receive distributions from qualified retirement plans, how much time is allowed to ro...

A: Qualified Retirement plan: This is an agreement between the employer and the employee regarding the ...

question_answer

Q: Perpetual Inventory Using LIFO Beginning inventory, purchases, and sales data for prepaid cell phone...

A: Perpetual inventory system: It refers to the inventory system that maintains the detailed records of...

question_answer

Q: Odessa Company uses the indirect method to prepare its statement of cash flows.  Please refer to the...

A: Statement of cash flows:This statement reports all the cash transactions which are responsible for i...

question_answer

Q: The costs of materials consumed in producing good units in the Production Department of Jacobs Compa...

A: Calculate the material cost per unit for the month of June.

question_answer

Q: Present Value of Bonds Payable; PremiumMoss Co. issued $42,000,000 of five-year, 11% bonds, with int...

A: Compute semi-annual interest payment on bonds as shown below: Semi-annual interest rate is 5.5% (11%...

question_answer

Q: Silver Head Company is a manufacturer of kitchen utensils. It produces all of itsproducts in one dep...

A: Computation of Equivalent Units:

question_answer

Q: 10 Question View Policies Current Attempt in Progress It costs Concord Company $26 per unit ($18 var...

A: Net income: Net income is the excess amount of revenue after deducting all the expenses of a company...