Neither the securities and exchange commission nor

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Neither the Securities and Exchange Commission nor any state securities commission has ap- proved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a crimina offense. Delivery of the notes, in book-entry form only through The Depository Trust Company, will be made on or about August 2, 2010. The date of this prospectus supplement is July 28, 2010. BofA Merrill Lynch JointBook-Running Managers J.P. Morgan SeniorCo-Managers Morgan Stanlej Mitsubishi UFJ Securities US Bancorp Co-Managers RBS Sun Trust Robinson Humphrey Wells Fargo Securities from the cash interest paid. The next section discusses how management reports, and how interpret, bonds on the balance sheet and interest expense on the income statement. ANALYZING DEBT FINANCING This section identifies and describes the financial statement effects of bond transactions. Financial Statement Effects of Debt Issuance Bonds Issued at Par When a bond sells at par, the issuing company receives the cash proceeds and accepts an gation to make payments per the bond contract. Specifically, cash is increased and a long liability (bonds payable) is increased by the same amount. There is no revenue or expense at issuance. Using the facts from our $10 million bond illustration above, the issuance of bon par has the following financial statement effects:
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Module 7 I Liability Recognition and Nonowner Financing 7-16 Balance Stieet '" Net Income Cash Asset Liabil- Contrib. Earned ities + Capital + Capital Rev- enues Expen- ses ction bonds + 10 000 000 for Cash' + 10,000,000 = Long-Tenn Debt ( _____________________________________________________________________________________________ l . = unt Bonds a bond is sold at a discount, the cash proceeds and net bond liability are recorded at the t of the proceeds received (not the face amount of the bond). Again, using the facts above our bond discount illustration, the financial statement effects follow: Balance Sheet Income Statement '" Net Income :Cash Asset + Noncash Assets Liabil- ities + Contrib. + Earned Capital Capital Expen- ses ction \ bonds +$8,640,999 +$8,640,999 Y - ::ISCOunt Cash = Long-Term I _ :::ash Debt J __________________________________________________________________________ J . net bond liability (long-term debt) reported on the balance sheet consists of two components llows: Bonds payable, face . Less bond discount . Bonds payable, net . $10,000,000 (1,359,001) $ 8,640,999 are reported on the balance sheet net of any discount. When the bond matures, however, the _.-fXU1Y is obligated to repay the face amount ($10 million). Accordingly, at maturity, the bonds Ie account needs to read $10 million, the amount that is owed. This means that between the issuance and its maturity, the discount must decline to zero. This reduction of the discount Verizon's Zero-Coupon Debt o-coupon bonds and notes, called zeros, do not carry a coupon rate. Pricing of these bonds and tes is done in the same manner as those with coupon rates-the exception is the absence of an erest annuity. This means that the price is the present value of the principal payment at maturity; ce the bond is sold at a deep discount. Ve ri z 0 n reported on its zero-coupon debt in its 10-K e bonds have since been paid off):
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