Kế toán doanh nghiệp - Chapter 10: Reporting and analyzing long - Term liabilities

Financial AccountingJohn J. WildSeventh Edition Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Chapter 10Reporting and Analyzing Long-Term LiabilitiesBonds do not affect owner control.Interest on bonds is tax deductible.Bonds can increase return on equity.Advantages of BondsA110-*Bonds require payment of both periodic interest and par value at maturity.Bonds can decrease return on equity when the company pays more in interest than it earns on the borrowed funds.Disadvantages of BondsA110-*. . .an investment firm called an underwriter, resells the bonds toA trustee monitors the bond issue.A company can sell the bonds to. . . investorsBond-Issuing ProceduresA110-*Bond Issue DateBond Interest PaymentsBond Interest PaymentsCorporationInvestorsInterest payment = Bond par value ´ Contract interest rate x TimeBasics of BondsA110-*Bond Discount or PremiumP110-*Dow Chemical Company $1,0008.875% paid semiannually on 6/30 and 12/31Due (matures) on 2033Contract rateBond RetirementThe carrying value of the bond at maturity always equals its par value.Sometimes bonds are retired prior to their maturity. Two common ways to retire bonds, before maturity are through the exercise of a callable option or through purchasing them on the open market.Callable bonds present several accounting issues including calculating gains and losses.P410-*Note Maturity DateNote PayableCashCompanyLenderNote Issuance DateWhen is the repayment of the principal and interest going to be made?Long-Term Notes PayableC110-*Note Maturity DateCompanyLenderNote Issuance DateLong-Term Notes PayableSingle Payment of Principal plus InterestSingle Payment of Principal plus Interest (at maturity)C110-*Note Maturity DateCompanyLenderNote Issuance DateLong-Term Notes PayableRegular Payments of Principal plus InterestPayments can either be equal principal payments plus interest or equal payments.Regular Payments of Principal plus InterestC110-*(Over the life of the bond)Secured or Unsecured Term or Serial Registered or BearerConvertible and/or CallableTypes of BondsA210-*End of Chapter 1010-*