Bonds - more than $2 billion of unsecured bonds...

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Bonds: Long-Term Liabilities Long-term liabilities are obligations that a company expects to pay more than one year in the future. In this section we explain the accounting for the principal types of obligations reported in the long-term liabilities section of the balance sheet. These obligations often are in the form of bonds or long-term notes. Bonds are a form of interest-bearing note payable issued by corporations, universities, and governmental agencies. Bonds, like common stock, are sold in small denominations (usually $1,000 or multiples of $1,000). As a result, bonds attract many investors. Types of Bonds Bonds may have different features. In the following sections we describe some commonly issued types of bonds. Secured and Unsecured Bonds Secured bonds have specific assets of the issuer pledged as collateral for the bonds. Unsecured bonds are issued against the general credit of the borrower. Large corporations with good credit ratings use unsecured bonds extensively. For example, in a recent annual report, Dupont reported
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Unformatted text preview: more than $2 billion of unsecured bonds outstanding. Convertible and Callable Bonds Bonds that can be converted into common stock at the bondholder's option are convertible bonds . Bonds that the issuing company can retire at a stated dollar amount prior to maturity are callable bonds . Convertible bonds have features that are attractive both to bondholders and to the issuer. The conversion often gives bondholders an opportunity to benefit if the market price of the common stock increases substantially. Furthermore, until conversion, the bondholder receives interest on the bond. For the issuer, the bonds sell at a higher price and pay a lower rate of interest than comparable debt securities that do not have a conversion option. Many corporations, such as USAir, United States Steel Corp., and General Motors Corporation, have convertible bonds outstanding...
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This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 201 taught by Professor - during the Spring '11 term at Montgomery.

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Bonds - more than $2 billion of unsecured bonds...

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