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Unformatted text preview: Effective-Interest Amort. = Evident from the computations – the amount is different each year Stated rate of interest = $450 / $6,000 = 7.5% Yield of Interest = $427 / $6,101 = 7% Interest Expense = 2006: $427 | 2007: $425 | 2008: $424 | 2009: $422 2006 2007 2008 2009 Long-Term Liabilities: Bonds Payable, 7.5% Maturity amount + Premium 6,078 6,053 6,027 6,000 P10-13 Bonds are recorded based on ISSUE PRICE and not adjusted for market value changes. The market value changes for many reasons – especially changes in interest rates. The market value can also change as the result of changes in a company’s risk value (if there was a higher chance of bankruptcy the bonds would decline in value.) Hilton will have to pay the current market value because there is no call option. Bonds Payable (-L) 1,132,500,000 Loss on Retirement (-SE) 41,000,000 Cash (-A) 1,173,500,000...
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This note was uploaded on 05/07/2008 for the course H ADM 121 taught by Professor Ddittman during the Spring '07 term at Cornell.
- Spring '07