Hint adjust t he number of periods and t he ef f ec t

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Unformatted text preview: r knowledge of bond valuat ion. Hint: Adjust t he number of periods and t he ef f ec t ive rat e per period t o ref lec t t hat int erest is payable on a semi- annual basis (i.e., double t he periods and halve t he rat e). Instructions Read and answer eac h part of t he exerc ise prior t o looking at t he answer provided under Solut ions on your c ourse Home Page. P art A : P ract ice Exercises 1. Complet e Brief Exerc ise BE14- 1 on page 937. 2. Complet e Exerc ises E14- 16 and E14- 17 on pages 941–942. F ile: Topic 3: Notes Pay able Mo dule 2: Lo ng- T e r m F ina nc ia l... T opic 3: Notes Payable T he dif f erenc e bet ween c urrent not es payable and long- t erm not es payable is t he t ime lef t unt il t he obligat ion has t o be set t led. Ac c ount ing prac t ic es f or not es and bonds are very similar as bot h are valued and rec orded at t he present value of t he f ut ure c ash f lows. Disc ount s or premiums on not es are amort ized over t he t erm of t he obligat ion using t he ef f ec t ive rat e met hod. Even t hough t he legal f orm of a not e is dif f erent f rom a bond, t he ec onomic subst anc e is t he same, as t hey bot h represent subst ant ially t he same t reat ment f orm an ac c ount ing perspec t ive. Note: When debt sec urit ies are issued, suc h as bonds and not es payable wit h zero int erest or f or a non- monet ary c onsiderat ion, t he measurement must ref lec t t he underlying subst anc e of t he t ransac t ion, i.e., reasonable int erest rat es must be imput ed and t he f air value of t he debt and of t he non- monet ary c onsiderat ion should be used t o value t he t ransac t ions. Ac t ivit y 2- 3: Not es Payable Introduction T his ac t ivit y will provide an opport unit y f or you t o reinf orc e your underst anding of not es payable. Instructions Read and answer eac h part of t he exerc ise prior t o looking at t he answer provided under Solut ions on your c ourse Home Page. https://blackboar d.tr u.ca/webct/ur w/lc5122001.tp0/cobaltM ainFr ame.dowebct 7/9 9/10/13 Blackboar d Lear ning System P art A : P ract ice Exercises 1. Complet e Exerc ise E14- 4 on page 939. 2. Complet e Exerc ise E14- 5 on page 939. F ile: Topic 4: Presentation of Long- Term Debt Mo dule 2: Lo ng- T e r m F ina nc ia l... T opic 4: Presentation of Long-T erm Debt Pages 930–932of your t ext book disc uss issues relat ive t o t he present at ion of long- t erm debt on t he balanc e sheet and disc losure requirement s. In t he balanc e sheet , long t erm debt t ypic ally is report ed as a single amount , net of any disc ount or premium, rat her t han at it s f ac e amount ac c ompanied by a separat e valuat ion ac c ount f or t he disc ount or premium; however, det ails about t he amount s are provided in t he disc losures. Ac c ording t o GAAP t he c ompanies are not required t o, but have opt ion t o, value t heir f inanc ial liabilit ies at f air value. IF RS requires t hat t he opt ion be used only where f air value result s in more relevant inf ormat ion If t he c ompany elec t s t o report long- t erm debt at f air val...
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This note was uploaded on 02/05/2014 for the course BUS 370 taught by Professor Andreathomas during the Spring '13 term at Capital University.

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