Summary- ch14 - Summary: Ch. 14 Main issues: Valuation Life...

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Summary: Ch. 14 Main issues: Valuation Life cycle of long-term liabilities 1. Long-term liability - Nature of current liability: Consists of present obligations not payable within the operating cycle of the business, or a year whichever is longer. - Types of long-term liabilities: Bond payable, Note payable, and Mortgage note payable. 2. Bond payable a. Different types of bond payable: Term bonds, serial bonds, secured and unsecured bonds, convertible bonds, commodity-backed bonds, deep discount bonds. b. Valuation : The price of bonds is determined by the interaction between the bond’s stated interest rate and market rate . Bond price (sales price) = Present value (Principle) + Present value (Periodic interest) Issuance at par: Stated rate = market rate Issuance at premium: Stated rate > market rate Issuance at discount: Stated rate < market rate c. Accounting for the issuance of bonds . The face value of the bond Bond payable account Issuance at discount: Difference between sales price and face value Discount on B/P account (debit: Contra-account to B/P) Issuance at premium: Difference between sales price and face value
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This note was uploaded on 07/11/2010 for the course ACC 5110 taught by Professor Lee during the Winter '10 term at Wayne State University.

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Summary- ch14 - Summary: Ch. 14 Main issues: Valuation Life...

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