7252569-MIdterm-1 (dragged) 26

7252569-MIdterm-1 (dragged) 26 - business, or within a year...

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Kieso, Weygandt, Warfield, Young, Wiecek Intermediate Accounting, Eighth Canadian Edition 14-10 otherwise consider. Such restructuring could be through settlement of the debt at less than its carrying amount or continuation of the debt with a modification of terms. 37. Once loans are determined to be impaired, they should be measured at estimated net realizable amounts, which means discounting the expected future cash flows at the effective interest rate inherent in the loans (the historical rate is recommended over the market rate by HB Section 3025. LECTURE OUTLINE Students are generally familiar with the accounting for bonds payable from elementary accounting. Students, however, may be unfamiliar with the effective interest method of amortization of bond discount and premium. New for many students may also be the treatment of discounts and premiums on a net basis when presented on financial statements. A. Nature of Long-Term Debt 1. Consists of present obligations not payable within the operating cycles of the
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Unformatted text preview: business, or within a year if there are several cycles within a year. 2. Long-term creditors normally have no vote in management affairs and only receive a stated rate of interest regardless of the level of earnings. 3. Covenants or restrictions on the borrower for the protection of the lenders are stated in the bond indenture or note agreement. B. Bonds Payable 1. Discuss the different types of bonds such as term bonds, serial bonds, secured and unsecured bonds, convertible bonds, commodity backed bonds, deep discount bonds, guaranteed and income bonds, registered and coupon bonds. 2. Accounting for the issuance of bonds 3. Discount and premium on bonds a. Stated, coupon, or nominal rate of interest: the interest rate written in the terms of the bond indenture. b. Effective yield, or market rate: the interest rate actually earned by the bondholders. c. A premium (discount) exists when the market rate is lower (higher) than the stated rate....
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