can generally be classified into three different categories: bonds payable‚ notes payable‚ and capital leases. Bonds payable can be secured by collateral‚ such as a mortgage bond‚ or unsecured‚ backed only by a company’s promise to pay. Most bonds carry a stated rate of interest but others are sold at a discount with an implied rate of interest inherent in the discounted sale. Some bonds can be converted into other securities. Other bonds can be called in by the corporation. All of the terms and features
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PAKYO COMPANY for the year ended December 31‚ 2010 you are called upon to verify the accounts payable transactions. You find that the company does not make use of a voucher register but enters all merchandise purchases in a Purchases Journal‚ from which posting are made to a subsidiary accounts payable ledger. The subsidiary ledger balance of P1‚500‚000 as of December 31‚ 2010 agrees with the accounts payable balance in the company’s general ledger. An analysis of the account disclosed the following:
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on the face of the bond. It is used to compute the amount of cash interest paid to the bondholder. The market rate is the rate of return expected by investors who purchase the bonds. The market rate determines the market price of the bond. It incorporates the current risk-free rate‚ expectations about the relative riskiness of the borrower‚ and the rate of inflation. In general‚ there is an inverse relation between the bond’s market rate and the bond’s market price. Q7-4. Bonds are reported at historical
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period greater than one year. Examples would be bonds payable and long term notes payable 2. What is a bond? Bonds are a form of liability in which the issuing firm receives cash from the investors and issues bonds which are a form of notes payable and bond usually have a fixed maturity. Bonds usually have a coupon rate and pay interest semi annually. On maturity of the bond the face value is repaid to the investors. 8. Contrast these types of bonds: 1. Secured and unsecured. The difference
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Accounting for Bonds The rate of return required by the market might fluctuate daily: hence it is usual for bonds not to be issue at face value. Bonds will only be issued at face value if the rate demanded by bond holders (the market rate) is the same as the rate shown on the bonds (called the coupon rate). You should remember that‚ regardless of what the bond holder pay for the bond‚ the will receive the face value on maturity; and the interest payment the bond holder receive will be the coupon
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415 Total Current Assets 1‚000 810 Net plant and equipment 1‚000 870 TOTAL ASSETS 2‚000 1‚680 Liabilities and Equity 2004 2003 Accounts Payable 60 40 Notes Payable 140 60 Accruals 110 130 Total Current Liabilities 310 230 Long Term Bonds 754 580 TOTAL DEBT 1‚064 810 Preferred Stock 40 40 Common Stock 130 130 Retained earnings 766 700 TOTAL COMMON EQUITY 896
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two examples. (b) What is a bond? Long term liabilities are those liabilities which would be settled in a period greater than one year. Examples would be bonds payable and long term notes payable Bonds are a form of liability in which the issuing firm receives cash from the investors and issues bonds which are a form of notes payable and bond usually have a fixed maturity. Bonds usually have a coupon rate and pay interest semi annually. On maturity of the bond the face value is repaid to the
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no. 1 Notes payable: Arising from purchase of goods Arising from bank loans‚ on which marketable securities valued at P600‚000 have pledged as security‚ due Dec. 31‚ 2005 Arising from advances by officers‚ due June 30‚ 2005 Employees’ income tax withheld Advances received from customers on purchase orders Containers’ deposit Accounts payable arising from purchase of goods (P170‚000 + P30‚000) Customers’ account with credit balance Cash dividends payable Current portion of serial bonds (P50‚000 x 2)
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Extra Problem For each of the unrelated transactions described below‚ present the entry(ies) required to record the bond transactions. 1. On August 1‚ 2015‚ Lane Corporation called its 10% convertible bonds for conversion. The $7‚000‚000 par bonds were converted into 280‚000 shares of $20 par common stock. On August 1‚ there was $700‚000 of unamortized premium applicable to the bonds. The fair value of the common stock was $20 per share. Ignore all interest payments. 2. Packard‚ Inc. decides to issue
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6-2 6-2 Disclosures of types and changes in liabilities Explain 6-6 6-3 General obligation bonds Describe 6-3 6-4 GO Bonds and enterprise funds Explain 6-5 6-5 Debt margin Explain 6-7 6-6 Purpose of debt service funds Explain 6-8 6-7 Number of debt service funds Explain 6-11 6-8 Year end balance Explain 6-12 6-9 Amortization of premiums and discounts Explain 6-14 6-10 Advance refunding of bonds Describe 6-15 Cases: 6-1 Analysis of general obligation debt burden Assess New Exercises/Problems:
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