All companies must provide a schedule the maturities

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All companies must provide a schedule the maturities of their long-term debt in the footnotes to the financial statements. To illus Verizon reports $7,542 million in long-term debt due within one year in the current liability tion of the balance sheet shown earlier in the module. MID-MODULE REVIEW 3 Assume that on January 15, Verizon borrowed $10,000 on a 90-day, 6% note payable. The bank accrues interest daily based on a 365-day year. Use the financial statement effects template to show the January 31 interest accrual. The solution is on page 7-47.
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Module 7 I Liability Recognition and Nonowner Financing 7-12 I'V~"I.&.YZING LONG·TERM NONOPERATING LIABILITIES ies often include long-term nonoperating liabilities in their capital structure to fund -"'-termassets. Smaller amounts of long-term debt can be readily obtained from banks, private cements with insurance companies, and other credit sources. However, when a large amount of ing is required, the issuance of bonds (and notes) in capital markets is a cost-efficient way funds. The following discussion uses bonds for illustration, but the concepts also apply g-term notes. Bonds are structured like any other borrowing. The borrower receives cash and agrees to pay -with interest. Generally, the entire face amount (principal) of the bond is repaid at maturity end of the bond's life) and interest payments are made in the interim (usually semiannually). Companies that raise funds in the bond market normally work with an underwriter (like "II Lynch) to set the terms of the bond issue. The underwriter then sells individual bonds y in $1,000 denominations) from this general bond issue to its retail clients and profes- portfolio managers (like The Vanguard Group), and receives a fee for underwriting the issue. These bonds are investments for individual investors, other companies, retirement and insurance companies. After they are issued, the bonds can trade in the secondary market just like stocks. Market of bonds fluctuate daily despite the fact that the company's obligation for payment of cipal and interest normally remains fixed throughout the life of the bond. Then, why do prices change? The answer is that the bond's fixed rate of interest can be higher or lower me interest rates offered on other securities of similar risk. Because bonds compete with possible investments, bond prices are set relative to the prices of other investments. In a • titive investment market, a particular bond will become more or less desirable depend- the general level of interest rates offered by competing securities. Just as for any item, titive pressures will cause bond prices to rise and fall. This section analyzes and interprets the reporting for bonds. We also examine the mechanics d pricing and describe the accounting for, and reporting of, bonds.
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