Ch09(6th)Post - Chapter F9 Financing Activities 9-2...

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Financing Financing Activities Activities Chapter Chapter F9 F9
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9 - 2 1. Identify information that companies report about obligations to lenders and explain the transactions affecting long-term debt. 2. Describe appropriate accounting procedures for contingencies and commitments, including capital leases. 3. Identify information reported in the stockholders’ equity section of a corporate balance sheet and distinguish contributed capital from retained earnings. Objectives Objectives
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9 - 3 4. Explain transactions affecting stockholders’ equity and describe how these transactions are reported in a company’s financial statements. 5. Distinguish between preferred stock and common stock, and discuss why corporations may issue more than one type of stock. Objectives Objectives
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9 - 4 Liabilities are an organization’s obligations to deliver payments, goods, or services in the future. Notes Payable Accounts Payable Interest Payable Wages Payable Unearned Revenue
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9 - 5 (1) A present responsibility exists to transfer resources to another entity at some future time. (2) The organization cannot chose to avoid the transfer. (3) The event creating the responsibility has already occurred. Three Three Attributes of a Attributes of a Liability Liability
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9 - 6 Debt Obligations Debt Obligations A firm’s short-term and long- term borrowings are obligations to creditors, and this debt is separated into current- and long- term amounts. Obj - 1
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9 - 7 Debt Obligations Debt Obligations December 31, 2008 2007 December 31, 2008 2007 Liabilities: Current liabilities: Accounts payable $ 16,260 $ 9,610 Wages payable 3,590 -0- Unearned revenue 2,770 4,250 Interest payable 810 650 Notes payable, current 6,000 5,000 Total current liabilities 29,430 19,510 Notes payable, long-term 80,200 73,200 Total liabilities $109,630 $92,710 Obj - 1
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9 - 8 Long-term debt includes notes and bonds payable , and they are contracts (bond indenture) between borrowers and creditors. Debt Obligations Debt Obligations Obj - 1
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9 - 9 Company debts secured by company assets are referred to as secured debts. Major companies often issue debentures , or unsecured debts. Debt Obligations Debt Obligations Obj - 1
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9 - 10 Debt Obligations Debt Obligations Other common types of bonds are serial, callable, and convertible bonds. Obj - 1
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9 - 11 Debt Transactions Debt Transactions Favorite Cookie Company issued $20,000 of five-year bonds on January 1, 2008. The bonds pay 8% annually at the end of each year. Maturity, par or face value Stated or coupon rate of interest Obj - 1
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Debt Transactions Debt Transactions If Favorite Cookie Company’s bonds are issued at a price to provide the investor with a 9% return, then this return is known as the effective (market or real) rate of interest (yield) . How is the issue price of
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Ch09(6th)Post - Chapter F9 Financing Activities 9-2...

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