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1、chapter13LongTermLiabilities西方财务会计电子,1,CHAPTER 13,Long-Term Liabilities,chapter13LongTermLiabilities西方财务会计电子,2,LONG-TERM LIABILITIES(cont.),Do not require the use of funds within one year(or the next operating cycle,whichever is longer) Usually arise from major expenditures, such as acquisitions of
2、plant assets,the purchase of another company,or refinancing an existing long-term obligation that is about to mature.,chapter13LongTermLiabilities西方财务会计电子,3,LONG-TERM LIABILITIES,Relatively few in number but involve large dollar amounts. Examples: bonds, notes, equipment purchase obligations, perman
3、ent customer deposits, some obligations under pension and deferred compensation plans, certain types of lease obligations, deferred income taxes, and some deferred revenue items.,chapter13LongTermLiabilities西方财务会计电子,4,Long-term LiabilitiesMeasurement and Valuation,Record long-term liabilities at the
4、 fair value of the goods or services received. Interest expense is based on the market interest rate on the date of the debt issuance and the beginning balance of the liability. Book value is the present value of all future cash payments, discounted at the market interest rate at issuance.,chapter13
5、LongTermLiabilities西方财务会计电子,5,Advantages of Issuing Bonds,A principal advantage to income taxes. (page234) increase a companys rate of return on equity. (page 235),chapter13LongTermLiabilities西方财务会计电子,6,Types of Bonds (Cont.)(P.235),Term bonds(sinking fund bonds): Bonds that mature in one lump sum o
6、n a specified future date. Serial bonds: Bonds that mature in a series of installments at future dates.,chapter13LongTermLiabilities西方财务会计电子,7,Types of Bonds(P.236),Registered bonds: keeps a record of the names and addresses of all bondholders and pays interest only to those individuals whose names
7、are on file. Bearer (coupon) bonds: Unregistered bonds . pays interest to anyone who can show evidence of ownership.,chapter13LongTermLiabilities西方财务会计电子,8,Types of Bonds (Cont.)(P.236),Secured bonds(Collateral trust bonds): Bonds usually secured by stocks and bonds of other corporations owned by th
8、e issuing company. Unsecured (debenture) bonds: Bonds for which no specific collateral has been pledged.,chapter13LongTermLiabilities西方财务会计电子,9,Types of Bonds (Cont.)(P.235),Convertible bonds: Bonds that can be converted to other securities at the option of the bondholder.,chapter13LongTermLiabiliti
9、es西方财务会计电子,10,Types of Bonds (Cont.)(P.235),Junk bonds :High-risk, high-yield bonds issued by companies that are heavily in debt or weak financially.,chapter13LongTermLiabilities西方财务会计电子,11,In this chapter, we will discuss the term bonds.,chapter13LongTermLiabilities西方财务会计电子,12,Accounting for bonds
10、payable,Issue of bonds Semiannual interest payment Adjusting for interest expense Retirement of bonds at maturity,chapter13LongTermLiabilities西方财务会计电子,13,Bond issued at face amount,The entry: Cash 100 000 Bonds payable 10 000 Page 239240,chapter13LongTermLiabilities西方财务会计电子,14,Bond issued at premium
11、 or discount,Bond Prices at issuance date depends on the relationship between the effective interest rate and the coupon rate. effective interest rate sometimes is called yield or market rate. coupon rate sometimes is called stated rate.,chapter13LongTermLiabilities西方财务会计电子,15,Bond Prices,Market rat
12、e = stated rate Bonds sell at face or par value. Market rate stated rate Bonds sell at a discount (below face value). Market rate stated rate Bonds sell at a premium (above face value).,chapter13LongTermLiabilities西方财务会计电子,16,Bond Stated Interest Rate 10%,Yield,chapter13LongTermLiabilities西方财务会计电子,1
13、7,Bond issued at premium or discount,Example on page 238. The entry would be: (discount) Cash Discount on bonds payable Bonds payable,chapter13LongTermLiabilities西方财务会计电子,18,Bond issued at premium or discount,Example on page 238. The entry would be: (premium) Cash Bonds payable Premium on bonds paya
14、ble,chapter13LongTermLiabilities西方财务会计电子,19,Premium and discount amortizing,Interest method Straight-Line method,chapter13LongTermLiabilities西方财务会计电子,20,Interest Method,Interest Expense for each period is calculated as follows: Book Value of Bond at Beginning of Period Market Interest Rate at Date o
15、f Bond Issuance =Interest Expense The amortization for the discount or premium is calculated as follows: Cash Payment for Interest - Interest Expense =Amortization Amount,chapter13LongTermLiabilities西方财务会计电子,21,Interest Method example,Page 241242,chapter13LongTermLiabilities西方财务会计电子,22,Interest Meth
16、od Question,On 1/1/X9 Graphics Inc. issued $1,000,000, 10%, 5-year bonds at a discount of 92.6395. The bonds pay interest semiannually. The market interest rate was 12%. Using the effective interest method, what would be the interest expense for the first 6 months? a. $60,000.00 b. $55,583.70 c. $73
17、,605.00 d. $46,319.75,chapter13LongTermLiabilities西方财务会计电子,23,Interest Method Question,On 1/1/X9 Graphics Inc. issued $1,000,000, 10%, 5-year bonds at a discount of 92.6395. The bonds pay interest semiannually. The market interest rate was 12%. Using the effective interest method, what would be the
18、interest expense for the first 6 months? a. $60,000.00 b. $55,583.70 c. $73,605.00 d. $46,319.75,chapter13LongTermLiabilities西方财务会计电子,24,Interest Method Question,Using the effective interest method, determine the amortization for the discount for the first 6 months? a. $5,583.70 b. $55,583.70 c. $50
19、,000.00 d. $9,664.99,chapter13LongTermLiabilities西方财务会计电子,25,Interest Method Question,Using the effective interest method, determine the amortization for the discount for the first 6 months? a. $5,583.70 b. $55,583.70 c. $50,000.00 d. $9,664.99,Interest Expense$55,583.70 Cash Payment- 50,000.00 Disc
20、ount Amortized$ 5,583.70,chapter13LongTermLiabilities西方财务会计电子,26,In the previous examples, the bonds were sold on the bond date. But this is not always the case. Are you ready to see what happens when we sell bonds between the bonds interest dates?,chapter13LongTermLiabilities西方财务会计电子,27,Bonds Issue
21、d Between Interest Dates,When bonds are sold between the interest dates, the bond issuer collects cash for:The cash (or selling) price of the bonds AND The accrued interest since the last interest payment date.,chapter13LongTermLiabilities西方财务会计电子,28,Bonds Issued Between Interest Dates,On 4/1/1995 G
22、raphics Inc. issues 1,000 bonds at face value. The market interest is 10%. The bonds have the following terms: Face Value = $1,000 Maturity Date = 1/1/2000 (5 years) Stated Interest Rate = 10% Interest Dates = 6/30 & 12/31 Bond Date = 1/1/1995,chapter13LongTermLiabilities西方财务会计电子,29,Bonds Issued Bet
23、ween Interest Dates,Selling Price of Bonds,PV of Bonds at 1/1/1995,Principal (PV of $1, 10, 10%),Interest (PVA of $1, 10, 10%),Total PV,$1,000,000,Accrued Interest,($1,000,000 10% 3/12),25,000,Selling Price of Bond,1,025,000,chapter13LongTermLiabilities西方财务会计电子,30,Bonds Issued Between Interest Dates
24、,What does the $25,000 in accrued interest represent for Graphics Inc.?,chapter13LongTermLiabilities西方财务会计电子,31,Bonds Issued Between Interest Dates,What does the $25,000 in accrued interest represent for Graphics Inc.?,Interest Payable,chapter13LongTermLiabilities西方财务会计电子,32,Bonds Issued Between Int
25、erest Dates,Prepare the journal entry to record the bond issue on 4/1/1995.,chapter13LongTermLiabilities西方财务会计电子,33,Bonds Issued Between Interest Dates,Prepare the journal entry to record the bond issue on 4/1/1995.,chapter13LongTermLiabilities西方财务会计电子,34,Bonds Issued Between Interest Dates,Prepare the journal entry to record the bond interest payment on 6/30/1995.,chapter13LongTermLiabilities西方财务会计电子,35,Bonds Issued Between Interest Dates,Prepare the journal entry to record the bond interest payment on 6/30/1995.,chapter13LongTermLiabilities西方财务会计电子,36,