Chapter 10 Notes

Chapter 10 Notes - -Always credit bonds payable at face...

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Chapter 10 Notes - Given sales amount including taxes; divide by 1.sales tax rate -Advantages of bond financing: -stockholder control is not affected -Tax savings result -earnings per share may be higher -Bonds at a Discount D Cash D Discount on bonds payable C Bonds Payable -The sale of bonds above face value causes the total cost of borrowing to be less than the interest paid bond premium considered a reduction in the cost of borrowing
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Unformatted text preview: -Always credit bonds payable at face value-Premium: contractual > market-When bonds are converted into common stock: the carrying value is recorded into paid in capital accounts (A)Cash Payment (B) Interest Expense (D x %) (C) Reduction of Principal (A-B) (D)Principal Balance (D-C)-Debt to total assets: Total debt/Total assets (risk of being able to pay obligations)...
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