ch14-5th_outline - 1 CHAPTER 14 CHAPTER 10 (pp. 489-491)...

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1 CHAPTER 14 CHAPTER 10 (pp. 489-491) Chapter 12 (Appendix B) Spiceland, Sepe, Nelson, and Tomassini - Fifth Edition Bonds and Long Term Notes Revised January 2010 Learning Objectives 1. Distinguish between term bonds/notes and serial bonds/notes and between interest bearing bonds/notes and noninterest bearing (zero coupon) bonds/notes. 2. Be able to calculate t he issue (market) price of bonds/notes issued on the contract date. 3. Explain the difference between stated (coupon, nominal) interest rates and market (effective, yield) rates on bonds/notes. 4. Explain why the issue price of a bond/note may not be equal to its face value and the circumstances under which a bond/note will be issued at (a) a premium and (b) a discount. 5. Explain why the discount or premium on bonds/notes is amortized as an adjustment to interest expense or interest revenue over the term of debt securities. 6. Explain the difference between effective interest amortization and straight line amortization of discounts and premiums on bonds/notes. 7. Be able to prepare discount and premium amortization schedules under both the effective interest and straight line amortization approaches for bonds/notes in the following situations: a. interest bearing term bonds/notes b. noninterest bearing term bonds/notes c. interest bearing serial bonds/notes d. noninterest bearing serial bonds/notes. 1
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8. Prepare journal entries for the following events related to bonds/notes for both the issuer and the investor : a. issuance on the contract date b. issuance between interest dates c. recording interest expense/revenue on 1. interest payment dates 2. the end of an accounting period that does not coincide with the interest payment date d. maturity date 9. Prepare the balance sheet and income statement sections related to bonds/notes for both the issuer and the investor . 10. For debt issued for noncash assets, non-interest bearing debt issued for cash, and interest bearing debt with an effective rate different than the stated rate, prepare journal entries to record the issuance and recording of interest for both the debtor and the creditor. 11 . Prepare the journal entry(ies) related to an early extinguishment or retirement of debt (including updating interest accruals and discount/premium amortization) on the books of the issuer. 12. Distinguish between convertible debt and debt issued with detachable stock warrants. 13 . Prepare journal entries to record the issuance of convertible debt and convertible preferred stock and the exercise of the conversion privilege on the books of the issuer and investor. 14. Prepare journal entries to record the issuance of debt or stock issued with detachable warrants and the exercise of the warrants on the books of the issuer and investor using both the proportional and incremental methods . 15.
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This note was uploaded on 11/09/2010 for the course ACCT 301 taught by Professor Lynn during the Spring '10 term at University of Baltimore.

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ch14-5th_outline - 1 CHAPTER 14 CHAPTER 10 (pp. 489-491)...

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