11 Long-term Liabilities And Receivables ntermediate Accounting Accounting School. Zhongnan
11 Long-term Liabilities And Receivables Accounting School ·Zhongnan University of Economics & Law ntermediate Accounting I 中级会计学
Long-term Liabilities And Receiva 1. Reasons for Issuance of Long Term Liabilities v Debt financing may be the only available source of funds v Debt financing may have a lower cost v Debt financing offers an income tax advantage v The voting privilege is not shared Y Debt financing offers the opportunity for leverage
1. Reasons for Issuance of LongTerm Liabilities ✓ Debt financing may be the only available source of funds. ✓ Debt financing may have a lower cost. ✓ Debt financing offers an income tax advantage. ✓ The voting privilege is not shared. ✓ Debt financing offers the opportunity for leverage. Intermediate Accounting 11 Long-term Liabilities And Receivables
2. Bonds Payable Characteristics of Bonds. Debenture bonds Mortgage bonds c Registered bonds Coupon bonds Zero-coupon bonds Callable bonds Convertible bonds Serial bonds
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
Long-term Liabilities And Receiva Steps a Company Must Follow When It Issues bonds It must receive approval from regulatory authorities, such as the securities and Exchange commission The company 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
Steps a Company Must Follow When It Issues Bonds ▪ It must receive approval from regulatory authorities, such as the Securities and Exchange Commission. ▪ The company 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
Long-term Liabilities And Receiva Recording the Issuance of bonds Company j sells bonds with a face value of $400,000 on the authorization date at 102 Cash($400,000x1.02) 408.000 Bonds payable 400.000 A contra account- yable 8.000 subtracted from nds with a face value of Bonds payable lthorization date at 97 Cash($40 388.000 Discount on bonds payable 12.000 Bonds payable 400.000
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 1.02) 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