中级会计学知识.ppt

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1、Bonds and Long-Term Notes99-2Bonds Bond Selling PriceBond Selling PriceBond CertificateBond CertificateInterest PaymentsInterest PaymentsFace Value Payment at Face Value Payment at End of Bond TermEnd of Bond TermAt Bond Issuance DateAt Bond Issuance DateCompany Company Issuing Issuing BondsBondsSub

2、sequent PeriodsSubsequent PeriodsInvestor Investor Buying Buying BondsBondsCompany Company Issuing Issuing BondsBondsInvestor Investor Buying Buying BondsBonds9-3Recording Bonds at IssuanceOn January 1,2011,Masterwear Industries issued$700,000 of 12%bonds.Interest of$42,000 is payable semiannually o

3、n June 30 and December 31.The bonds mature in three years.The entire bond issue was sold in a private placement to United Intergroup,Inc.at face amount.At Issuance(January 1)Masterwear(Issuer)Cash700,000Bonds payable 700,000United(Investor)Investment in bonds(face amount)700,000Cash 700,0009-4Determ

4、ining the Selling Price9-5Determining the Selling PriceOn January 1,2011,Masterwear Industries issued$700,000 of 12%bonds,dated January 1.Interest is payable semiannually on June 30 and December 31.The bonds mature in three years.The market yield for bonds of similar risk and maturity is 14%.The ent

5、ire bond issue was purchased by United Intergroup.Because interest is paid semiannually,the present value calculations use:(a)the semiannual stated rate(6%),(b)the semiannual market rate(7%),and(c)6(3 x 2)semi-annual periods.Present value of an ordinary annuity of$1:n=6,i=7%present value of$1:n=6,i=

6、7%9-6Bonds Issued at a DiscountMasterwear(Issuer)Cash666,633Discount on bonds payable 33,367Bonds payable 700,000United(Investor)Investment in bonds 700,000Discount on bond investment 33,367Cash 666,6339-7Determining Interest Effective Interest MethodInterest each period is recorded as the effective

7、 market rate of interest multiplied by the outstanding balance of the debt(during the interest period).Interest is recorded as expense to the issuer and revenue to the investor.For the first six-month interest period the amount is calculated as follows:$666,633(14%2)=$46,664Outstanding Balance Effec

8、tive Rate Effective Interest9-8Recording Interest ExpenseThe effective interest is calculated each period as the market rate times the amount of the debt outstanding during the interest period.At the First Interest Date(June 30)Masterwear(Issuer)Interest expense46,664Discount on bonds payable 4,664C

9、ash 42,000United(Investor)Cash42,000Discount on bond investment 4,664Investment revenue 46,664$700,000 (12%2)=$42,000$666,633 (14%2)=$46,664$46,664-$42,000=$4,664 9-9Bond Amortization ScheduleHere is a bond amortization schedule showing the cash interest,effective interest,discount amortization,and

10、the carrying value of the bonds.$666,633+$4,664=$671,2979-10Bond Issued at PremiumOn January 1,2011,Masterwear Industries issued$700,000 of 12%bonds,dated January 1.Interest is payable semiannually on June 30 and December 31.The bonds mature in three years.The market yield for bonds of similar risk

11、and maturity is 10%10%.The entire bond issue was purchased by United Intergroup.Present value of an ordinary annuity of$1:n=6,i=6%present value of$1:n=6,i=5%9-11Premium Amortization ScheduleHere is a bond amortization schedule showing the cash interest,effective interest,premium amortization,and the

12、 carrying value of the bonds.$735,533-$5,223=$730,310$735,533 5%=$36,7779-12Bonds Sold at a PremiumMasterwear(Issuer)Cash735,533Premium on bonds payable 35,533Bonds payable 700,000United(Investor)Investment in bonds 700,000Premium on bond investment 35,533Cash 735,533Interest expense and interest re

13、venue will be recognized in a manner consistent with bonds issued at a discount.9-13Premium and Discount Amortization Compared1/1/1112/31/13$700,000$735,533$666,633Premium AmortizationDiscount Amortization9-14When Financial Statements Are Prepared Between Interest DatesOn Mar 1,2011,Masterwear Indus

14、tries issued$700,000 of 12%bonds.Interest is payable semiannually on Aug 31 and Feb 28.The bonds mature in three years.The market yield for bonds of similar risk and maturity is 14%.The entire bond issue was purchased by United Intergroup at a cost of$666,633.$700,000 (12%2)=$42,000$666,633 (14%2)=$

15、46,664Semi-annual Stated InterestAug 31,2011 Effective Interest9-15When Financial Statements Are Prepared Between Interest Datesbefore the second interest date of before the second interest date of Feb 28,so we must,so we must accrue interest for 4 months from accrue interest for 4 months from Aug 3

16、1 to Dec 31.to Dec 31.Year-end accrual of interest expense and interest income.Masterwear(Issuer)Interest expense31,327Discount on bonds payable 3,327Interest payable 28,000United(Investor)Interest receivable28,000Discount on bond investment 3,327Investment revenue 31,327$42,000 4/6=$28,000$671,297

17、7%4/6=$31,327$31,327-$28,000=$3,3279-16When Financial Statements Are Prepared Between Interest DatesOn Feb 28,the next interest payment date,On Feb 28,the next interest payment date,the following entries would be recorded.the following entries would be recorded.Masterwear(Issuer)Interest expense23,4

18、96Interest payable21,000Discount on bonds payable 2,496Cash 42,000United(Investor)Cash42,000Discount on bond investment 2,496Interest receivable21,000Investment revenue 23,4969-17Long-Term NotesBankPromissoryNote(Note Payable)Company(Borrower)Property,goods,or services.The liability,long-term note p

19、ayable,is reported at its present value,similar to the accounting for bonds payable.9-18Long-Term NotesOn January 1,2011,Skill Graphics,Inc.borrowed$700,000 cash from First Bank and issued a 3-year,$700,000 promissory note.Interest of$42,000 was payable semiannually on June 30 and December 31.Januar

20、y 1,At IssuanceCash700,000long-term Note payable 700,0009-19Long-Term NotesAt Each of the Six Interest DatesAt MaturityInterest expense 42,000Cash 42,000long-term Notes payable700,000Cash 700,0009-20Installment Notes分期付款分期付款oTo compute cash payment use present value tables.oEach payment includes bot

21、h an interest amount and a principal amount.oInterest expense or revenue:Effective interest rate Outstanding balance of debt Interest expense or revenueoPrincipal reduction:Cash amount Interest component Principal reduction per period9-219-22Installment NotesOn January 2,2011,Matrix Inc.leased an eq

22、uipment(fair value is 2,500,000,useful life is 5 years)for 3 years.900,000 lease expenses to be paid on December 31,each year.The market rate of interest is 8%.Prepare the required journal entries for Matrix Inc.2,319,390/2,500,000=Called:financinglease融资租赁PresentAmountPVFactorValueLease900,000 2,57

23、71=2,319,3909-23Equipment_ financinglease 2,319,390Discount on payable 380,610 long-term payable(长期应付款)2,700,000At the lease Date(January 1)9-249-25Installment Notes9-26Installment Notes9-27Installment NotesOn Dec 31,2011Interest expense 185,551.20 Discount on payable 185,551.20 long-term payable 90

24、0,000Cash 900,0009-28Installment NotesOn Dec 31,2012Interest expense 128,395.3 Discount on payable 128,395.3 long-term payable 900,000Cash 900,0009-29Installment NotesOn Dec 31,2013Interest expense 66,663.5 Discount on payable 66,663.5 long-term payable 900,000Cash 900,0009-30Early Extinguishment of

25、 Debt提前清偿债务提前清偿债务Debt retired at maturity results in no gains or losses.Debt retired before maturity may result in an gain or loss on extinguishment.Cash Proceeds Book Value=Gain or LossBUT9-31Early Extinguishment of DebtIllustration On January 1,2011,Masterwear Industries called its$700,000,12%bond

26、s when their carrying amount was$676,290.The indenture specified a call price of$685,000.The bonds were issued previously at a price to yield 14%.$685,000 676,290$700,000 676,290Masterwear(Issuer)Bonds payable700,000Loss on early extinguishment 8,710Discount on bonds payable 23,710Cash 685,0009-32Co

27、nvertible Bonds可转换债券可转换债券Some bonds may be converted into common stock at the option of the holder.包括负债成份(该债券的现值)和权益成份(发行价格扣除负债部分).负债成份需按照实际利率确认费用.Bonds into Stock9-33Convertible BondsOn January 1,2011,HTL Manufacturers issued$100,000,000 of 6%convertible debentures,5 years,market rate is 9%.The bon

28、ds are convertible at the option of the holder into$1 per common stock at a conversion ratio of 10 shares per$100 bond.At Issuance,January 1,2011PresentAmountPVFactorValueInterest6,000,000 3.8897=Principal100,000,000 0.6499=Presentvalueofbonds88,328,2009-34Cash 100,000,000Discount on Convertible bon

29、ds payable 11,671,800Convertible bonds payable 100,000,000contributed surplus(资本公积)11,671,800At Issuance,January 1,20119-3588,328,200*9%=7,949,538100,000,000*6%=6,000,000Interest expense 7,949,538 Discount on Convertible bonds payable 1,949,538 Interest payable 6,000,000On Dec 31,20119-36Convertible

30、 BondsAssume the bondholder exercise their option to convert the bonds into shares of stock on Jan 1,2012Convertible bonds payable 100,000,000contributed surplus 11,671,800 Paid-in capital 10,000,000 Discount on Convertible bonds payable 9,722,262 contributed surplus 91,949,538100,000 bonds/100 10 s

31、hares$1 par=$10,000,000 per value9-37Troubled debt restructuring 债务重组troubled debt restructuring:When changing the original terms of a debt agreement is motivated by financial difficulties experienced by the debtor.9-38Troubled debt restructuringA troubled debt restructuring may be achieved in eithe

32、r of two ways:1.The debt may be settled at the time of the restructuring.2.The debt may be continued,but with modified terms.9-39 Debt Is Settled 清偿债务清偿债务 The payment to settle a debt in a troubled debt restructuring might be cash,or a non-cash asset,or even shares of the debtors stock.9-409-419-42D

33、ebt Is SettledEagle Boats agrees to settle Matrix Inc.$30 million debt in exchange for property having a fair value of$20 million.The carrying amount of the property on Matrixs books is$17 million:($in millions)Land($20 million minus$17 million).3 Gain on disposition of assets.3Account payable(carry

34、ing amount).30 Gain on troubled debt restructuring(营业外收入营业外收入_债务重组利得债务重组利得)10Land(fair value).209-43Debt Is SettledEagle Boats agrees to settle Matrix Inc.1,000,000 debt in exchange for equipment having a fair value of 900,000.Eagle Boats has recorded 40,000 of allowance for uncollectible accounts.T

35、he initial cost of the equipment is 1,100,000,accumulated depreciation is 400,000.Prepare the journal entry for Matrix IncAccount payable 1,000,000 Accumulated depreciation 400,000Fixed assets_ equipment 1,100,000Non-operation revenues_ sale of equipment 200,000Gain on troubled debt restructuring(营业

36、外收入营业外收入_债务重组利得债务重组利得)100,0009-44Prepare the journal entry for Eagle Boats Fixed assets_ equipment 900,000loss on troubled debt restructuring(营业外支出营业外支出_债务重组损失债务重组损失)60,000allowance for uncollectible accounts 40,000 Account receivable 1,000,0009-45Debt Is SettledEagle Boats agrees to settle Matrix I

37、nc.1,000,000 debt in exchange for inventories having a fair value of 800,000,the cost is 500,000.Eagle Boats has recorded 120,000 of allowance for uncollectible accounts.The initial cost of the equipment is 1,100,000,accumulated depreciation is 400,000.Prepare the journal entry for Matrix IncAccount

38、 payable 1,000,000 Sales revenues 800,000Gain on troubled debt restructuring(营业外收入营业外收入_债务重组利得债务重组利得)200,000The cost of goods sold 500,000 inventory 500,000 9-46Prepare the journal entry for Eagle Boats Inventory 800,000loss on troubled debt restructuring(营业外支出营业外支出_债务重组损失债务重组损失)80,000allowance for

39、uncollectible accounts 120,000 Account receivable 1,000,0009-47 Debt Is Continued,but with Modified Terms 修改债务条件修改债务条件Brillard Properties owes First Prudent Bank$30 million under a 10%note with two years remaining to maturity.Due to financial difficulties of the developer,the previous years interest

40、($3 million)was not paid.First Prudent Bank agrees to:1.Forgive the interest accrued from last year.2.Reduce the remaining two interest payments to$2 million each.3.Reduce the principal to$25 million.($in millions)Accrued interest payable .4 Gain on debt restructuring(营业外收入营业外收入_债务重组利得债务重组利得).49-48At Each of the Two Interest Dates ($in millions)Accrued interest payable.2 Cash(revised interest amount).2At MaturityNote payable.25 Cash(revised principal amount).25 End of Chapter 9