ACC 321 CH 14
Long term debt consists of
probable future sacrifices of economic benefits arising from present obligations that are not
payable within a year or the operating cycle of the company, whichever is longer
Long term debt categories
Bonds payable
Long-Term notes payable
Mortgages payable
Pension liabilities
Lease liabilities
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Long term debt has various covenants or restrictions
Bonds payable
Bond contract knows as bond indenture
Represents promise to pay: sum of money at designated maturity date plus periodic interest at a
specified rate on the maturity amount (face value)
Paper certificate, typically a 1000 face value
Interest payments usually made semiannually
Used when the amount of capital needed is too large for one lender to supply
How do you calculate the amount of interest that is actually paid to the bondholder each period?
, Stated rate*Face Value of the Bond
How do you calculate the amount of interest that is actually recorded as interest expense by the
issuer of the bonds?
Market rate*Carrying value of the bond
If a bond's stated rate is 8% and the market rate is 6%, that bond is?
If a bond's stated rate is 8% and the market rate is 10%, that bond is?
Service master company issues 100,000 in bonds, due in five years with 9 % interest payable
annually at year-end. At the time of issue, the market rate for such bonds is 11%
Buchanan Company issues at par 10-year term bonds with a par value of $800,000, dated
January 1, 2014, and bearing interest at an annual rate of 10 percent payable semiannually on
January 1 and July 1, it records the following entry.
On the date of issue, Jan 1, 2017:
Cash 800000
Bonds payable 800000
Buchanan Company issues at par 10-year term bonds with a par value of $800,000, dated
January 1, 2014, and bearing interest at an annual rate of 10 percent payable semiannually on
January 1 and July 1, it records the following entry.
To record first semiannual interest payment on July 1, 2017
Interest Expense 40,000
Cash 40,000
Buchanan Company issues at par 10-year term bonds with a par value of $800,000, dated
January 1, 2014, and bearing interest at an annual rate of 10 percent payable semiannually on
January 1 and July 1, it records the following entry.
To accrue interest expense at Dec. 31, 2017
Interest expense 40,000
Interest payable 40,000
If Buchanan Company issues $800,000 of bonds on
January 1, 2017, at 97, and bearing interest at an annual rate of 10
Long term debt consists of
probable future sacrifices of economic benefits arising from present obligations that are not
payable within a year or the operating cycle of the company, whichever is longer
Long term debt categories
Bonds payable
Long-Term notes payable
Mortgages payable
Pension liabilities
Lease liabilities
Previous
Play
Next
Rewind 10 seconds
Move forward 10 seconds
Unmute
0:00
/
0:15
Full screen
Brainpower
Read More
Long term debt has various covenants or restrictions
Bonds payable
Bond contract knows as bond indenture
Represents promise to pay: sum of money at designated maturity date plus periodic interest at a
specified rate on the maturity amount (face value)
Paper certificate, typically a 1000 face value
Interest payments usually made semiannually
Used when the amount of capital needed is too large for one lender to supply
How do you calculate the amount of interest that is actually paid to the bondholder each period?
, Stated rate*Face Value of the Bond
How do you calculate the amount of interest that is actually recorded as interest expense by the
issuer of the bonds?
Market rate*Carrying value of the bond
If a bond's stated rate is 8% and the market rate is 6%, that bond is?
If a bond's stated rate is 8% and the market rate is 10%, that bond is?
Service master company issues 100,000 in bonds, due in five years with 9 % interest payable
annually at year-end. At the time of issue, the market rate for such bonds is 11%
Buchanan Company issues at par 10-year term bonds with a par value of $800,000, dated
January 1, 2014, and bearing interest at an annual rate of 10 percent payable semiannually on
January 1 and July 1, it records the following entry.
On the date of issue, Jan 1, 2017:
Cash 800000
Bonds payable 800000
Buchanan Company issues at par 10-year term bonds with a par value of $800,000, dated
January 1, 2014, and bearing interest at an annual rate of 10 percent payable semiannually on
January 1 and July 1, it records the following entry.
To record first semiannual interest payment on July 1, 2017
Interest Expense 40,000
Cash 40,000
Buchanan Company issues at par 10-year term bonds with a par value of $800,000, dated
January 1, 2014, and bearing interest at an annual rate of 10 percent payable semiannually on
January 1 and July 1, it records the following entry.
To accrue interest expense at Dec. 31, 2017
Interest expense 40,000
Interest payable 40,000
If Buchanan Company issues $800,000 of bonds on
January 1, 2017, at 97, and bearing interest at an annual rate of 10
