Quản trị Kinh doanh - Chapter 14: Long - Term liabilities

Long-Term LiabilitiesCopyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill .EducationChapter 14PowerPoint Editor: Beth Kane, MBA, CPAWild, Shaw, and ChiappettaFundamental Accounting Principles22nd Edition  14-A1: Bond Financing 2Bond Interest PaymentsCorporationInvestorsBond Issue DateBond Interest PaymentsInterest Payment = Bond Par Value × Stated Interest Rate x TimeBond FinancingTransactions during the bond lifeP13Bond FinancingBonds do not affect owner control.Interest on bonds is tax deductible.Bonds can increase return on equity.Advantages Bonds require payment of both periodic interest and par value at maturity.Bonds can decrease return on equity.Disadvantages A14Bond TradingA1Bonds are securities that can be purchased or sold in the securities markets. They have a market value which is expressed as a percent of their par value. The closing price indicates that the IBM stock is being sold at 121.18% of face value. 5Bond Issuing ProceduresA16 14-P1: Issuing Bonds at Par 7Issuing Bonds at ParOn Jan. 1, 2015, a company issued the following bonds:Par Value: $800,000Stated Interest Rate: 9%Interest Dates: 6/30 and 12/31Maturity Date = Dec. 31, 2034 (20 years)P18$800,000 × 9% × ½ year = $36,000Issuing Bonds at ParOn June 30, 2015, the issuer of the bond pays the first semiannual interest payment of $36,000.P1This entry is made every six months until the bonds mature.9Issuing Bonds at ParOn December 31, 2034, the bonds mature and the issuer of the bond pays face value of $800,000 to the bondholders.P110Bond Discount or PremiumP111 14-P2: Issuing Bonds at a Discount 12Fila issues bonds with the following provisions: Par Value: $100,000Issue Price: 96.454% of par valueStated Interest Rate: 8% Market Interest Rate: 10%Interest Dates: 6/30 and 12/31Bond Date: Dec. 31, 2015 Maturity Date: Dec. 31, 2017 (2 years)Issuing Bonds at a Discount}Bond will sell at a discount.P213On Dec. 31, 2015, Fila should record the bond issue.Issuing Bonds at a DiscountPar value $ 100,000  Cash proceeds 96,454 *Discount $ 3,546  *$100,000 x 96.454% Contra-LiabilityAccountP214Maturity ValueCarrying ValueIssuing Bonds at a DiscountP215$3,546 ÷ 4 periods = $887 (rounded)$100,000 × 8% × ½ = $4,000Fila will make the following entry every six months to record the cash interest payment and the amortization of the discount.Amortizing a Bond DiscountP216Amortizing a Bond DiscountP2These two columns always sum to par value for a discount bond.17NEED-TO-KNOWSemiannual Period-EndCarrying Value(0)12/31/20X1$248$6,752(1)06/30/20X21866,814(2)12/31/20X21246,876(3)06/30/20X3626,938(4)12/31/20X30$7,000Change in Carrying Value$248 / 4 semiannual periods = $62 per period12/31/20X124812/31/20X17,00006/30/20X26212/31/20X26206/30/20X36212/31/20X36212/31/20X3012/31/20X37,000A company issues 8%, two-year bonds on December 31, 20X1, with a par value of $7,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 10%, which implies a selling price of 96.46 or $6,752. (a) Prepare an amortization table for these bonds; use the straight-line method to amortize the discount. Then, prepare journal entries to record (b) the issuance of bonds on December 31, 20X1; (c ) the first through fourth interest payments on each June 30 and December 31; and (d) the maturity of the bond on December 31, 20X3.Discount on Bonds PayableBonds PayableUnamortized Discount Retirement Price = GainCarrying Value < Retirement Price = LossAssume that $100,000 of callable bonds will be retired on July 1, 2015, after the first interest payment. The bond carrying value is $104,500.The bonds have a call premium of $3,000. P438Bond RetirementConversion of Bonds to StockOn January 1, $100,000 par value bonds of Converse, with a carrying value of $100,000, are converted to 15,000 shares of $2 par value common stock.15,000 shares × $2 par value per shareP439 14-C1: Installment Notes 40Note Maturity DateNote PayableCashCompanyLenderNote DateWhen is the repayment of the principal and interest going to be made?Long-Term Notes PayableC141Note Maturity DateCompanyLenderNote DateSingle Payment of Principal plus InterestLong-Term Notes PayableC1Single Payment of Principal plus Interest42Note Maturity DateCompanyLenderNote DateRegular Payments of Principal plus InterestRegular Payments of Principal plus InterestLong-Term Notes PayableC143Installment NotesOn January 1, 2015, Foghog borrows $60,000 from a bank to purchase equipment. It signs an 8% installment note requiring 6 annual payments of principal plus interest.Compute the periodic payment by dividing the face amount of the note by the present value factor.C144Installment Notes with Equal PaymentsC145Installment Notes with Equal PaymentsLet’s record the first payment made on December 31, 2015 by Foghog to the bank.Refer back to the amortization schedule to make the December 31, 2016 payment on the note.C146Mortgage Notes and BondsA mortgage is a legal agreement that helps protect the lender if the borrower fails to make the required payments.It gives the lender the right to be paid out of the cash proceeds from the sale of the borrower’s assets specifically identified in the mortgage contract. C147$1,000 = Present Value of an Ordinary Annuity$1,000 = PVA (n=4, i=5%) x PaymentOn January 1, 20X1, a company borrows $1,000 cash by signing a four-year, 5% installment note. The note requires four equal total payments of accrued interest and principal on December 31 of each year from 20X1 through 20X4.1. Compute the amount of each of the four equal total payments.$1,000 = PaymentPVA (n=4, i=5%)NEED-TO-KNOWPV of $1FV of $1PV Ord AnnFV Ord AnnC148C149$1,000 = Present Value of an Ordinary Annuity$1,000 = PVA (n=4, i=5%) x Payment = PaymentOn January 1, 20X1, a company borrows $1,000 cash by signing a four-year, 5% installment note. The note requires four equal total payments of accrued interest and principal on December 31 of each year from 20X1 through 20X4.1. Compute the amount of each of the four equal total payments.$1,000 = Payment$1,000 = Payment3.5460$282PVA (n=4, i=5%)NEED-TO-KNOWPV of $1FV of $1PV Ord AnnFV Ord AnnC1502. Prepare an amortization table for this installment note.Period End(A)Beginning Balance(B)Debit Interest Expense[5% x (A)](C)Debit Notes Payable[(D) - (B)](D)CreditCash(E)Ending Balance[(A) - (C)]12/31/20X1$1,000$50$232$282$76812/31/20X27683824428252412/31/20X35242625628226812/31/20X4268142682820$128$1,000$1,128On January 1, 20X1, a company borrows $1,000 cash by signing a four-year, 5% installment note. The note requires four equal total payments of accrued interest and principal on December 31 of each year from 20X1 through 20X4.1. Compute the amount of each of the four equal total payments.$282NEED-TO-KNOW3. Prepare journal entries to record the loan on January 1, 20X1, and the four payments from December 31, 20X1, through December 31, 20X4.C151Period End(A)Beginning Balance(B)Debit Interest Expense[5% x (A)](C)Debit Notes Payable[(D) - (B)](D)CreditCash(E)Ending Balance[(A) - (C)]12/31/20X1$1,000$50$232$282$76812/31/20X27683824428252412/31/20X35242625628226812/31/20X426814*2682820DebitCredit01/01/20X1Cash1,000Notes payable1,00012/31/20X1Interest expense($1,000 x .05)50Notes payable232Cash 28212/31/20X2Interest expense($768 x .05)38Notes payable244Cash 28212/31/20X3Interest expense($524 x .05)26Notes payable256Cash 28212/31/20X4Interest expense(* Rounded)14Notes payable268Cash 282General JournalNEED-TO-KNOWC152Global ViewAccounting for Bonds and NotesThe definitions and characteristics of bonds and notes are broadly similar for both U.S. GAAP and IFRS. The accounting for issuances of bonds, market pricing, and retirement of both bonds and notes is similar. Both U.S. GAAP and IFRS also allow companies to account for bonds and notes using fair value. Accounting for Leases and PensionsBoth U.S. GAAP and IFRS require companies to distinguish between operating leases and capital leases; with IFRS calling the latter finance leases. The accounting and reporting for leases are broadly similar, with the main difference that the criteria for identifying a lease as a capital or finance lease is more general under IFRS. For pensions, the methods of accounting and reporting are similar for both U.S. GAAP and IFRS. 53 14-A2: Features of Bonds and Notes 54Secured and Unsecured Term and Serial Registered and BearerConvertible and CallableFeatures of Bonds and NotesA255 14-A3: Debt-to-Equity Ratio 56This ratio helps investors determine the risk of investing in a company by dividing its total liabilities by total equity.Debt-to-Equity RatioDebt-to-equity ratioTotal liabilitiesTotal equity=A357 14-C2: Present Values of Bonds and Notes 58Present Value of $1 RatePeriods3%4%5%1 0.9709 0.9615 0.9524 2 0.9426 0.9246 0.9070 3 0.9151 0.8890 0.8638 4 0.8885 0.8548 0.8227 5 0.8626 0.8219 0.7835 6 0.8375 0.7903 0.7462 7 0.8131 0.7599 0.7107 8 0.7894 0.7307 0.6768 9 0.7664 0.7026 0.6446 10 0.7441 0.6756 0.6139 Appendix 14A: Present Values of Bonds and NotesFace amount = $100,000Contract rate = 8%Market rate = 10%Interest paid semiannuallyFirst, we calculate the present value of the principal repayment in 4 periods (2 years × 2 payments per year, using 5% market rate (10% annual rate ÷ 2 payments per year).$100,000 × 0.8227 = $82,270C259Present Value of Annuity of $1 RatePeriods3%4%5%1 0.9709 0.9615 0.9524 2 1.9135 1.8861 1.8594 3 2.8286 2.7751 2.7232 4 3.7171 3.6299 3.5460 5 4.5797 4.4518 4.3295 6 5.4172 5.2421 5.0757 7 6.2303 6.0021 5.7864 8 7.0197 6.7327 6.4632 9 7.7861 7.4353 7.1078 10 8.5302 8.1109 7.7217 Appendix 14A: Present Values of Bonds and Notes$100,000 × 8% × ½ = $4,000Semiannual Interest Annuity   Present AmountPV FactorValuePrincipal $ 100,000 0.8227 $ 82,270 Interest 4,000 3.5460 14,184 Issue price of debt  $ 96,454     $4,000 × 3.5460 = $14,184C260 14-P5: Effective Interest Amortization of a Discount Bond 61Appendix 14B: Effective Interest AmortizationP5Effective Interest Amortization of Bond DiscountStated Rate: 8%Effective Rate: 10% 6263 14-P6: Effective Interest Amortization of a Premium Bond Appendix 14B: Effective Interest AmortizationP6Effective Interest Amortization of Bond PremiumStated Rate: 12%Effective Rate: 10%64 14-C3: Issuing Bonds between Interest Dates 65Appendix14C: Issuing Bonds Between Interest DatesAvia sells $100,000 of its 9% bonds at par on March 1, 2015, 60 days after the stated issue date. The interest on Avia bonds is payable semiannual on each June 30 and December 31.Stated Issuedate 1/1Date of sale 3/1First Interestdate 6/30$1,500 accrued$3,000 earnedBondholder pays$1,500 to issuerIssuer pays $4,500 to bondholderC366 14-C4: Leases and Pensions 67Appendix 14D: Leases and PensionsA lease is a contractual agreement between the lessor (asset owner) and the lessee (asset renter or tenant) that grants the lessee the right to use the asset for a period of time in return for cash (rent) payments.Operating LeasesOperating leases are short-term (or cancelable) leases in which the lessor retains the risks and rewards of ownership. Examples include most car and apartment rental agreements.Capital LeasesCapital leases are long-term (or non-cancelable) leases by which the lessor transfers substantially all risks and rewards of ownership to the lessee. Examples include leases of airplanes and department store buildings.C468Appendix 14D: Leases and PensionsA pension is a contractual agreement between an employer and its employees for the employer to provide benefits (payments) to employees after they retire.Defined Benefit PlansThe employer’s contributions vary, depending on assumptions about future pension assets and liabilities. A pension liability is reported when the accumulated benefit obligation is more than the plan assets, a so-called underfunded plan.C469End of Chapter 1470