Chapter 11 Long-term Liabilities And Receivables.ppt

11 Long-term Liabilities And Receivables
Accounting School · Zhongnan University of Economics & Law
ntermediate Accounting
I
中级会计学
1. Reasons for Issuance of Long-Term Liabilities
Debt financing may be the only available source of funds.
Debt financing may have a lower cost.
Debt financing offers an e tax advantage.
The voting privilege is not shared.
Debt financing offers the opportunity for leverage.
Intermediate Accounting 11 Long-term Liabilities And Receivables
Characteristics of Bonds
Debenture bonds
Mortgage bonds
Registered bonds
Coupon bonds
Zero-coupon bonds
Callable bonds
Convertible bonds
Serial bonds
Intermediate Accounting 11 Long-term Liabilities And Receivables
2. Bonds Payable
Steps pany Must Follow When It Issues Bonds
It must receive approval from regulatory authorities, such as the Securities and mission.
pany must set the terms of the bond issue, such as the contract rate and the maturity date.
It must make a public announcement of its intent to sell the bonds on a particular date and print the bond certificates.
Intermediate Accounting 11 Long-term Liabilities And Receivables
Recording the Issuance of Bonds
Company J sells bonds with a face value of $400,000 on the authorization date at 102.
Cash ($400,000 x ) 408,000
Bonds Payable 400,000
Premium on Bonds Payable 8,000
Company M sells bonds with a face value of $400,000 on the authorization date at 97.
Cash ($400,000 x .97) 388,000
Discount on Bonds Payable 12,000
Bonds Payable 400,000
A contra account—subtracted from Bonds Payable
Intermediate Accounting 11 Long-term Liabilities And Receivables
Recording the Issuance of Bonds
On March 1, 2004, Grimes Corporation issues $800,000 of 10-year bonds dated January 1, 2004 at par. The bonds have a contract (stated) interest rate of 12% and pay interest semiannually.
Cash 816,000
Interest Expense 16,000
Bonds Payable 800,000
$800,000 x x 2/12
Continued
Intermediate Accounting 11 Long-term Liabilities And Recei