CH 14 - Chapter 14 Long Term Liabilities Intermediate...

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Unformatted text preview: Chapter 14 Long Term Liabilities Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield Copyright Protected Chapter 14-2 1. Describe the formal procedures associated with issuing long- term debt . 2. Identify various types of bond issues. 3. Describe the accounting valuation for bonds at date of issuance. 4. Apply the methods of bond discount and premium amortization. 5. Describe the accounting for the extinguishment of debt. 6. Explain the accounting for long-term notes payable. 7. Explain the reporting of off-balance-sheet financing arrangements. 8. Indicate how to present and analyze long-term debt. Learning Objectives Chapter 14-3 Bonds Payable Long-term debt consists of probable future sacrifices of economic benefits arising from present obligations that are not payable within a year or the operating cycle of the company, whichever is longer. LO 1 Describe the formal procedures associated with issuing long-term debt. Examples: Bonds payable Notes payable Mortgages payable Pension liabilities Lease liabilities Long-term debt has various covenants or restrictions . Chapter 14-4 Issuing Bonds LO 1 Describe the formal procedures associated with issuing long-term debt. Bond contract known as a bond indenture . Represents a promise to pay: (1) sum of money at designated maturity date, plus (2) periodic interest at a specified rate on the maturity amount (face value). Paper certificate, typically a $1,000 face value. Interest payments usually made semiannually. Purpose is to borrow when the amount of capital needed is too large for one lender to supply. 5 Valuation Sometimes you see a phrase like, The bonds were issued at 103. This means that the bonds present value was 103% of the face value. This is usually used in exercises because it expedites the calculation of the present value Bonds issued at Par means they were issued at face value General Terms LO 3 Describe the accounting valuation for bonds at date of issuance. Chapter 14-6 Types and Ratings of Bonds LO 2 Identify various types of bond issues. Common types found in practice: Secured and Unsecured (debenture) bonds, Term, Serial, and Callable bonds, Convertible bonds, Commodity-backed bonds, Deep- discount bonds (Zero-interest debenture bonds), Registered bonds and bearer or coupon bonds, Income and Revenue bonds. Chapter 14-7 Valuation of Bonds Discount and Premium LO 3 Describe the accounting valuation for bonds at date of issuance. Between the time the company sets the terms and the time it issues the bonds, the market conditions and the financial position of the issuing corporation may change significantly. Such changes affect the marketability of the bonds and thus their selling price....
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CH 14 - Chapter 14 Long Term Liabilities Intermediate...

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