Accounting Principles Long-Term Liabilities参考.pptx

;;Long-term liabilities are obligations that are expected to be paid after one year. Bonds are a form of interest-bearing notes payable.;Types of Bonds;State laws grant corporations the power to issue bonds. Board of directors and stockholders must approve bond issues. Board of directors must stipulate number of bonds to be authorized, total face value, and contractual interest rate. Bond terms set forth in legal document known as a bond indenture. Bond certificate, typically a $1,000 face value.;Represents a promise to pay: sum of money at designated maturity date, plus periodic interest at a contractual (stated) rate on the maturity amount (face value). Interest payments usually made semiannually. Issued to obtain large amounts of long-term capital. Investment company sells the bonds for the issuing company.;LO 1;Determining the Market Value of a Bond;Determining the Market Value of a Bond;Determining the Market Value of a Bond;State whether each of the following statements is true or false. _______ 1. Mortgage bonds and sinking fund bonds are both examples of secured bonds. _______ 2. Unsecured bonds are also known as debenture bonds. _______ 3. The stated rate is the rate investors demand for loaning funds. _______ 4. The face value is the amount of principal the issuing company must pay at the maturity date. _______ 5. The market price of a bond is equal to its maturity value.;Corporation records bond transactions when it issues (sells), redeems (buys back) bonds, and when bondholders convert bonds into common stock. NOTE: If bondholders sell their bond investments to other investors, the issuing company receives no further money on the transaction, nor does the issuing company journalize the transaction.;Issue at Face Value, Discount, or Premium?;The rate of interest investors demand for loaning funds to a corporation is the: contractual interest rate. face value rate. market interest rate. stated interest rate.;Karson Inc. issues 10-year bon