14: In a Set of Financial Statements, What Information Is Conveyed about Noncurrent Liabilities Such as Bonds?
- Page ID
- 24747
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- 14.1: Debt Financing
- This page explains debt financing, highlighting its pros and cons. It is a key funding source for businesses, offering tax-deductible interest costs and the potential for profit leverage. However, it carries risks such as bankruptcy if liabilities are unmet. The document distinguishes between notes, which are private agreements, and bonds, which represent public debt offerings regulated by law.
- 14.2: The Issuance of Notes and Bonds
- This page outlines the characteristics of notes and bonds, emphasizing key terms such as face value, interest rates, and repayment structures, including term and serial debts. It explains the implications of selling bonds between interest dates, including adjustments for cash prices and interest payments. The obligations of debtors are highlighted, as well as examples like Brisbane Company to clarify the accounting treatment.
- 14.3: Accounting for Zero-Coupon Bonds
- This page explains zero-coupon bonds, which are sold at a discount and pay no interest until maturity, returning their face value. Investors benefit from the bond's appreciation over time, with pricing determined by present value calculations. Interest can be calculated using the effective rate method or the straight-line method, with the latter potentially misrepresenting interest rates. U.S.
- 14.4: Pricing and Reporting Term Bonds
- This page covers key financial concepts, including the distinction between stated cash interest rates and effective interest rates in term bonds, emphasizing necessary adjustments for accurate bond pricing and interest expense reporting, illustrated with an example from Smith Corporation. It also clarifies the difference between annuity due and ordinary annuity, providing formulas for present value calculations and offering Excel usage tips.
- 14.5: Issuing and Accounting for Serial Bonds
- This page teaches students about serial bonds, covering their definition, pricing, accounting, and interest determination. Unlike term bonds, serial bonds require periodic payments of interest and principal portions.
- 14.6: Bonds with Other Than Annual Interest Payments
- This page teaches students about calculating interest payments on bonds with non-annual payment schedules, such as quarterly or semiannually. It covers how to determine stated and effective interest rates and the number of periods for present value calculations.
- 14.7: End-of-Chapter Exercises
- This page includes questions and problems about debt financing, bonds, and accounting practices, covering risks, definitions, bankruptcy considerations, and covenants. It also presents practical scenarios related to loan repayments and journal entries. Additionally, it describes Webworks' financial activities, including equipment purchases, sales, accounts management, and necessary accounting adjustments.