Chapter 10
Long-Term
Liabilities
Skyline College
Lecture Notes
Funding Growth
Growth usually requires investment in longterm assets and research and development
How do companies raise long-term funds?
Issuance of
capital stock
Issuance of
long-term debt
Take on long-term debt?
How much debt to carry?
What types of debt to incur?
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10–2
Deciding to Issue Long-Term Debt
Advantages to
consider
Disadvantages to consider
No loss of stockholder control A high level of debt exposes a
as when issuing stock
company to financial risk
The interest on debt is taxdeductible
If earnings on funds borrowed
do not exceed interest on debt,
If earnings on funds borrowed negative financial leverage is
experienced
exceed interest on debt,
financial leverage is gained
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10–3
Average Debt to Equity for
Selected Industries
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10–4
Evaluating Long-Term Debt
Many companies use the debt to equity ratio
when assessing how much debt to carry
T otalLiabilities
Debt toEquity Ratio 
T otalStockholders’ Equity
$3,520.5 $10,115.5
McDonald’s Debt toEquity Ratio 
 1.0
$14,201.5
McDonald’s also has long-term leases
that do not appear on the balance sheet,
called off-balance sheet financing.
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10–5
Interest Coverage Ratio
Measures how much risk a company is
undertaking with its long-term debt
IncomeBeforeIncomeT axes InterestExpense
InterestCoverageRatio 
InterestExpense
Measures the degree of protection a company
has from default on interest payments
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10–6
Interest Coverage Ratio Illustrated
McDonald’s 2004 annual report shows that the
company had income before income taxes of $3,202.4
million and interest expense of $358.4 million.
IncomeBeforeT axes InterestExpense
InterestCoverageRatio 
InterestExpense
$3,202.4  $358.4

$358.4
 9.9 times
McDonald’s interest expense was covered 9.9 times in 2004. However,
management will add the company’s off-the-balance sheet rent expense of
$1,003.2 to its interest expense. This procedure decreases the coverage
ratio to 3.4 times, still adequate to cover interest payments.
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10–7
Types of Long-Term Debt
 Bonds payable
 Notes payable
 Mortgages payable
 Long-term leases
 Pensions
 Other postretirement
benefits
 Deferred income taxes
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10–8
Long-Term Debt
Bonds Payable
 Most common type of
long-term debt
 May be convertible to
common stock
 Involves a debt to many
creditors
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Notes Payable
 Represents a loan from a
bank or other creditor
Deutsche Telekom
International Finance
recently raised $14.6
billion by issuing a series
of long-term notes
denominated in dollars,
Euros, pounds, and yen.
10–9
Mortgages Payable
Long-term debt secured by real property. Usually repaid
in equal monthly installments that include interest on the
debt and a reduction in the initial debt.
Illustration: Monthly Payment Schedule on a $50,000, 12% mortgage
Payment Date
6/1
7/1
8/1
9/1
Unpaid Bal. At
Beg. of Period
$50,000
49,700
49,397
M onthly
Payment
Interest for 1
M onth at 1% on
Unpaid Bal.
$800
800
800
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$500
497
494
Reduction in Debt
Unpaid Bal. At
End of Period
$300
303
306
$50,000
49,700
49,397
49,091
10–10
Leases
• Companies may obtain an operating asset in
three ways:
Borrow the money and buy the asset
Rent the asset on a short-term lease (operating
lease; payments are treated as rent expense)
Obtain the asset on a long-term lease (may be
structured as a capital lease or an operating lease)
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10–11
Capital Leases
Accounting standards require
that a lease be treated as a
capital lease if the lease:
 Cannot be cancelled
 Has about the same
duration as the useful life
of the asset
 Stipulates that the lessee
has the option to buy the
asset at a nominal price
at the end of the lease
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Accounting for a
Capital Lease
The lessee should:
1) Record the asset
2) Record depreciation on
the asset
3) Record a liability equal to
the present value of the
total lease payments
during the lease term
10–12
Capital Lease Illustrated
Glenellen Manufacturing Company enters into a long-term
lease for a machine. The lease terms call for an annual
payment of $4,000 for six years, which approximates the
useful life of the machine. At the end of the lease period,
the title to the machine passes to Glenellen.
Use present value techniques to place a value on the asset and on the
corresponding liability. Assume that the interest cost on the unpaid part
of the obligation is 16 percent.
$4,000 x 3.685 = $14,740
Capital Lease Equipment
Capital Lease Obligations
To record capital lease on
machinery
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14,740
14,740
10–13
Capital Lease Illustrated (cont’d)
Each year, Glenellen must record depreciation on the leased asset.
Assume the company uses the straight-line method and no salvage value.
Depreciation Expense, Capital Lease Equipment
Accum. Depreciation, Capital Lease Equip.
To record depr. Expense on capital
lease machinery
2,457
2,457
Glenellen must also record interest expense for the lease. The interest
expense for each year is computed by multiplying the interest rate by the
amount of remaining lease obligation.
Interest Expense
Capital Lease Obligations
Cash
Made payment on capital lease
$14,740 x 16% = $2,358
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2,358
1,642
4,000
10–14
Off-Balance Sheet Financing
A legal way of structuring a lease commitment
so that it does not have to be included on the
balance sheet as a liability
Financial statement users should review the notes to
the financial statements for information about any
leases that may have the effect of long-term liabilities
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10–15
Discussion: Ethics on the Job
Cardle Industries plans to apply for a large loan
from United Bank in 20x8. In 20x6, the controller
recommends that the company renegotiate the
duration of its leases so that the company may
categorize them as operating leases. This will
improve the company’s debt to equity ratio.
Q. Do you think this recommendation is ethical?
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10–16
Pension Liabilities
Pension plans
 Require a company to pay
benefits to employees
after they retire
 Some companies pay full
cost of pension plan
 Employees often share the
cost of pension plans
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Employer
Employee
contributions contributions
Pension Fund
Pension benefits paid to
retired employees
10–17
Pension Plans
Defined Contribution Plan
Defined Benefit Plan
 Employer makes fixed, agreedupon, annual contribution
 Employer makes
variable payments
required to fund the
 Retirement payments depend on
estimated future liability
how much the fund earns
 Retirement benefits are
 Employees usually control their
fixed
own accounts and can transfer
funds if they leave the firm
 More complex
accounting required
Examples: 401(K) plans, profit-sharing plans, and ESOPs
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10–18
Other Postretirement Benefits
Retired employees may also be provided health care
benefits and other postretirement benefits
Recent accounting
 Estimates should account
standards hold
for retirement age, mortality,
postretirement benefits
future trends in health care
should be estimated and
expensed during the time  Future benefits should be
discounted to the current
that employees are
period
working in accordance
with the matching rule.
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10–19
Deferred Income Taxes
 Results from using different accounting methods to
calculate income taxes on the income statement and
income tax liability on the income tax return
 A company might use straight-line depreciation for
financial reporting and an accelerated method for
income tax purposes.
The difference in taxes resulting from the two
methods is listed as a long-term liability.
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10–20
Bonds
A security, usually long term, representing money that
a corporation borrows from the investing public
Governments and foreign countries
also issue bonds to raise money
Must be repaid at a specified time and require periodic
payments of interest at a specified rate at specified times
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10–21
What Is a Bond Issue?
Prices of Bonds
A bond issue is the
total value of bonds
issued at one time
• Stated in terms of a
percentage of face value
• Bonds selling at 100
• Sell at face or par value
For example, a
$1,000,000 bond issue
could consist of one
thousand, $1,000 bonds
• Bonds selling above 100
• Sell at a premium
• Bonds selling below 100
• Sell at a discount
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10–22
Selling Price of Bond Illustrated
A bond issue is quoted at 103 ½
What is the selling price of a $1,000 bond?
A bond issue quoted at 103 ½ means that the bond sells at 103.5
percent of its face value
BondSelling Price Face Value  QuotedPercentageof Face Value
 $1,000 1.035
 $1,035
This bond sells at a premium and would cost the buyer $1,035
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10–23
Interest Rates
 Face Interest Rate
 Market Interest Rate
Fixed rate of interest paid to
bondholders based on the
face value of the bonds
Rate of interest paid in the
market on bonds of similar
risk, also called the effective
interest rate
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10–24
Discounts and Premiums
Discount
• Equals the excess of
the face value over the
issue price.
Premium
• Equals the excess of
the issue price over the
face value.
• The issue price will be
less than the face
value when:
• The issue price will be
more than the face
value when
Market > Face
Market < Face
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10–25
Bond Characteristics
Issued on the basis of a firm’s general credit
Carry a pledge of certain corporate assets as a
Secured guarantee of repayment
Term
All bonds of an issue mature at the same time
Bonds of an issue mature on different dates
Serial
Gives issuer the right to buy back and retire the
Callable
bonds before maturity at a specified call price
Allows bondholder to exchange a bond for a
Convertible
specified number of shares of common stock
Registered Issued to a specific bondholder
Not registered with the organization
Coupon
Unsecured
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10–26
Issuing Bonds Payable
The board of directors must submit the appropriate
legal documents to the Securities and Exchange
Commission (SEC) for approval to issue bonds
 No journal entry is required for the authorization
of the bond issue (most companies disclose in
the notes to the financial statements)
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10–27
Bonds Issued at Face Value
Katakis Corporation issues $100,000 of 9 percent, 5-year
bonds on January 1, 20x4 and sells them on the same date
for their face value. The bond indenture states that interest
is to be paid on January 1 and July 1 of each year.
Jan. 1
Cash
100,000
Bonds Payable
Sold $100,000 of 9%, 5-year
bonds at face value
100,000
Record a semiannual interest payment:
Bond Interest Expense
Cash (Interest Payable)
Paid (or accrued) semiannual
interest to bondholders of 9%, 5year bonds
4,500
4,500
Interest Principal Rate T ime
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 $100,000 .09 6/12 year
 $4,500
10–28
Bonds Issued at a Discount
Katakis Corporation issues $100,000 of 9 percent, 5-year
bonds at 96.149 on January 1, 20x4, when the market rate
is 10 percent.
Record the issuance of the bonds at a discount:
20x4
Jan. 1
Cash
Unamortized Bond Discount
Bonds Payable
Sold $100,000 of 9%, 5-year
bonds at 96.149
Face amount of bonds
Less purchase price of bonds
($100,000 x .96149)
Unamortized bond discount
96,149
3,851
100,000
$100,000
96,149
$ 3,851
Unamortized Bond
Discount is a
contra-liability
account
Carrying Value of Bonds = Face Value – Unamortized Bond Discount
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10–29
Bonds Issued at a Premium
Katakis Corporation issues $100,000 of 9 percent, 5-year
bonds for $104,100 on January 1, 20x4, when the market
rate is 8 percent.
Record the issuance of the bonds at a premium:
20x4
Jan. 1
Cash
104,100
Unamortized Bond Premium
Bonds Payable
Sold $100,000 of 9%, 5-year
bonds at 104.1
($100,000 x 1.041)
Purchase price of bonds
$104,100
Less face amount of bonds
100,000
Unamortized bond premium
$ 4,100
4,100
100,000
Carrying Value of Bonds = Face Value + Unamortized Bond Premium
= $100,000 + $4,100 = $104,100
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10–30
Bond Issue Costs
Can amount to as much as 5 percent
of a bond issue
 Establish a long-term prepaid account for
these costs and amortize over life of bonds
 or issue costs can be subtracted from the
proceeds making the discount bigger or the
premium smaller
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10–31
Influence of the Market Interest Rate
on Bonds
The market interest rate varies from day to day
and therefore what investors are willing to pay
changes as well
 If current market interest rate > face interest
investors are willing to pay less
 If current market interest rate < face interest
investors are willing to pay more
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10–32
Case 1: Present Value
Market interest rate > Face interest rate
A bond has a face value of $10,000 and pays fixed interest of $450
every six months (a 9 percent annual rate). The bond is due in 5 years
and the market interest rate is 12 percent.
What is the present value of the bond?
Determine the interest rate and number of periods to use in the present value tables
• Divide the annual interest rate by the number of periods in the year
12% ÷ 2 = 6%
• Multiply the number of periods in one year by the number of years
2 x 5 = 10 periods
Present value of 10 periodic payments @ 6%
Present value of a single payment at the end
of 10 periods @ 6%
Present value of $10,000 bond
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Table 4
$450 x 7.360
$3,312.00
Table 3
$10,000 x .558
5,580.00
$8,892.00
10–33
Case 2: Present Value
Market interest rate < Face interest rate
A bond has a face value of $10,000 and pays fixed interest of $450
every six months (a 9 percent annual rate). The bond is due in 5 years
and the market interest rate is 8 percent.
What is the present value of the bond?
Present value of 10 periodic payments @ 4%
Table 4
$450 x 8.111
$3,649.95
Present value of a single payment at the end
of 10 periods @ 4%
Table 3
$10,000 x .676
6,760.00
Present value of $10,000 bond
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$10,409.95
10–34
Bond Discounts or Premiums
Amount by which the total interest
cost is higher or lower than the
total interest payments
Amortized over the life of the bonds
 Use straight-line
 or effective interest method
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10–35
Total Interest Cost Illustrated
Katakis Corporation issues $100,000 of 9 percent, 5-year
bonds at 96.149 when the market rate is 10 percent. The
bonds sold for $96,149 resulting in an unamortized bond
discount of $3,851.
The bonds were issued at a discount:
 Although the company does not receive the full face value of the
bonds on issue, it still must pay back the full face value at maturity
InterestCost toCompany StatedInterestPayments Amountof Bond Discount
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10–36
Calculating Total Interest Cost
Katakis Corporation issues $100,000 of 9 %, 5-year bonds at
96.149 when the market rate is 10 percent. The bonds sold for
$96,149, resulting in an unamortized bond discount of $3,851.
Cash to be paid to bondholders
Face value at maturity
Interest payments ($100,000 x .09 x 5 years)
Total cash paid to bondholders
Less cash received from bondholders
Total interest cost
$100,000
45,000
$145,000
96,149
$ 48,851
Or, alternately
Interest payments ($100,000 x .09 x 5 years)
Bond discount
Total interest cost
$45,000
3,851
$ 48,851
The bond discount increases the interest paid on the bonds from
the stated interest rate to the effective interest rate.
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10–37
Accounting for Total Interest Cost
Effective Interest Rate = Stated Rate + Discount
Amortization of the bond discount
 Must be allocated over the remaining life of the
bonds as an increase in the interest expense each
period
 Interest expense for each period will exceed the
actual payment of interest by the amount of the
bond discount amortized over the period
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10–38
Zero Coupon Bonds
Do not require periodic interest payments
Represent a promise to pay a fixed amount at
the maturity date
Zero coupon bonds are issued by
some companies
and governmental units
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10–39
Straight-Line Method
Equal amortization of the bond discount for each
interest period
Face value = $100,000
Face interest rate = 9%
Life of bond = 5 years
Interest payments = Semiannual
Bond discount = $3,851
Step 1: Determine the total number of interest payments
T otalInterestPayments InterestPaymentsper Year  Life of Bonds
 2  5  10 periods
Step 2: Determine the amount of bond discount to amortize each
interest period
Bond Discount
Amortizati
on of Bond Discount per Period
T otalInterestPayments
$3,851

 $385(rounded)
10 periods
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10–40
Straight-Line Method (cont’d)
Step 3: Determine the cash interest payment amount
Cash InterestPayment Face Value  Face InterestRate T ime
6
 $100,000  .09   $4,500
12
Step 4: Determine the total interest expense per interest period
InterestExpenseper Period InterestPayment Amortizati
on of Bond Discount
 $4,500 $385 $4,885
Record first semiannual interest payment and amortization of
bond discount
20x4
July 1
Bond Interest Expense
4,885
Unamortized Bond Discount
Cash (or Interest Payable)
Paid (or accrued) semiannual interest
to bondholders and amortized
discount on 9%, 5-year bonds
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385
4,500
10–41
Weaknesses of the
Straight-Line Method
When used to amortize a discount, the
carrying value goes up each period, but the
bond interest expense stays the same; thus,
the rate of interest falls over time.
When used to amortize a premium, the rate
of interest rises over time.
used only when it does not lead to a material
difference from the effective interest method
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10–42
Effective Interest Method
Applies a constant interest rate to the carrying value of
bonds at the beginning of the interest period
 Rate equals the market, or effective, rate at the
time the bonds were issued.
 Amount amortized is the difference between
interest computed and actual interest paid to
bondholders
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10–43
Interest and Amortization of a Bond
Discount: Effective Interest Method
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10–44
Bond Amortization –
Effective Interest Method
Face value = $100,000
Face Interest rate = 9%
Life of bond = 5 years
Column A
Carrying value =
Face value –
Unamortized bond
discount
A
Semiannual
Interest
Period
0
1
Interest payments = Semiannual
Bond discount = $3,851
Column B – Use market interest rate
($96,149 x .10 x 6/12 = $4,807)
Column C – Use face interest rate on bond
($100,00 x .09 x 6/12 = $4,500)
Carrying
Value at
Beginning of
Period
B
Semiannual
Interest
Expense at
10% to be
Recorded
(5% x A)
C
Semiannual
Interest to be
Paid to
Bondholders
(4.5% x
$100,000)
$96,149
$4,807
$4,500
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D
E
F
Amortization
of Bond
Discount
(B – C)
Unamortized
Bond
Discount at
End of Period
(E – D)
$3,851
Carrying
Value at End
of Period
(A + D)
$96,149
10–45
Bond Amortization –
Effective Interest Method (cont’d)
Column D
Discount amortized =
Effective interest expense –
Actual interest payment to
bondholders
($4,807 – $4,500 = $307)
A
Semiannual
Interest
Period
0
1
Column F
Carrying value at beg. of
period + Amort. during the
period
($96,149 + $307 = $96,456)
Carrying
Value at
Beginning of
Period
B
Semiannual
Interest
Expense at
10% to be
Recorded
(5% x A)
C
Semiannual
Interest to be
Paid to
Bondholders
(4.5% x
$100,000)
$96,149
$4,807
$4,500
Notice that the sum of the
carrying value and the
unamortized discount always
equals the face value of the bonds
D
Amortization
of Bond
Discount
(B – C)
$307
E
F
Unamortized
Bond
Discount at
End of Period
(E – D)
$3,851
3,544
Carrying
Value at End
of Period
(A + D)
$96,149
96,456
Column E
Bond discount at beg. of period –
Current pd amort. ($3,851 – $307 = $3,544)
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10–46
Bond Amortization –
Effective Interest Method (cont’d)
Record first semiannual interest payment and
amortization of bond discount:
20x4
July 1
Bond Interest Expense
4,807
Unamortized Bond Discount
Cash (or Interest Payable)
Paid (or accrued) semiannual interest
to bondholders and amortized
discount on 9%, 5-year bonds
307
4,500
It is not necessary to prepare an interest
and amortization table to determine
amortization of a discount for the period
Amountof Interest ot Amortize (CarryingValue  EffectiveInterestRate) – InterestPayment
 ($96,149 .05) – $4,500 $307
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10–47
Bond Premiums
 Bondholders pay more than face value
for bonds
 Premium is an amount that bondholders
have prepaid their own interest over life
of the issue
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10–48
Total Interest Cost
Katakis Corporation issues $100,000 of 9 percent, 5-year bonds at 104.1 on
January 1, 20x4, when the market rate is 8 percent. The bonds sold for
$104,100 resulting in an unamortized bond premium of $4,100.
Cash to be paid to bondholders
Face value at maturity
Interest payments ($100,000 x .09 x 5 years)
Total cash paid to bondholders
Less cash received from bondholders
Total interest cost
$100,000
45,000
$145,000
104,100
$ 40,900
Or, alternately
Interest payments ($100,000 x .09 x 5 years)
Less bond premium
Total interest cost
$45,000
4,100
$ 40,900
The bond premium decreases the interest paid on the bonds from the
stated interest rate to the effective interest rate.
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10–49
Interest and Amortization of a Bond
Premium: Effective Interest Method
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10–50
Bond Amortization – Effective Interest
Method (cont’d)
Record first semiannual interest payment and amortization of bond
premium:
20x4
July 1
Bond Interest Expense
4,164
Unamortized Bond Premium
336
Cash (or Interest Payable)
Paid (or accrued) semiannual interest
to bondholders and amortized
premium on 9%, 5-year bonds
4,500
It is not necessary to prepare an interest
and amortization table to determine
amortization of a premium for the period
Amountof Interest ot Amortize InterestPayment- (CarryingValue  EffectiveInterestRate)
 $4,500– ($104,100 .04) $336
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10–51
Calling Bonds
Why call bonds before their maturity date?
 If bond interest rates drop, the company can call
the bonds and reissue debt at a lower cost.
 Company has earned enough to pay off the debt.
 The reason for having the debt no longer exists.
 The company wants to restructure its debt to
equity ratio.
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10–52
Callable Bonds Illustrated
The issuer has the right to buy back and retire bonds at a
specified call price
Katakis Corporation can call or retire at 105 the $100,000 of bonds it
issued at a premium (104.1). It decides to do so on July 1, 20x7. The
entry for the required interest payment and amortization of the
premium has already been made.
Record the retirement of the bonds:
20x7
July 1
Bonds Payable
Unamortized Bond Premium
Loss on Retirement of Bonds
Cash
Retired 9% bonds at 105
100,000
1,447
3,553
105,000
The loss occurs because the call price of the bonds is greater than the carrying value
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10–53
Callable Bonds (Purchase)
Katakis Corporation can call or retire at 105 the $100,000 of bonds it
issued at a premium (104.1). Because of a rise in interest rates, Katakis is
able to purchase the $100,000 bond issue on the open market for 85. The
entry for the required interest payment and amortization of the premium
has already been made.
Record the purchase of the bonds:
20x7
July 1
Bonds Payable
Unamortized Bond Premium
Cash
Gain on Retirement of Bonds
Purchased and retired 9%
bonds at 85
100,000
1,447
85,000
16,447
The gain occurs because the call price of the bonds is less than than the carrying
value
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10–54
Convertible Bonds Illustrated
Katakis Corporation issued $100,000 of convertible bonds on January 1,
20x4, that can be converted to 40 shares of common stock for each
$1,000 bond. The bondholders decide to convert all the bonds to $8 par
value common stock on July 1, 20x7.
Record the bond conversion:
20x7
July 1

Bonds Payable
100,000
Unamortized Bond Premium
1,447
Common Stock
Additional Paid-in Capital
Converted 9% bonds payable into $8
par value common stock at a rate of
40 shares for each $1,000 bond
32,000
69,447
No loss or gain is recorded because the bond liability and the
associated unamortized discount or premium are written off the books.
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10–55
Sale of Bonds Between Interest Dates
When a company
sells a bond
between interest
dates…
it collects the
interest that would
have accrued for
the partial period
preceding the
issue date, and…
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at the end of the
first period, it pays
the interest for the
entire period.
10–56
Sale of Bonds Between
Interest Dates Illustrated
Katakis Corporation sold $100,000 of 9 percent, 5-year bonds on May 1,
20x4 (after the January 1, 20x4 issue date).
Record the sale of the bonds:
20x4
May 1
Cash
103,000
Bond Interest Expense
Bonds Payable
Sold 9%, 5-year bonds at face value
plus 4 months’ accrued interest
($100,000 x .09 x 4/12 = $3,000)
Bondholder pays
interest that would
have accrued for the
partial period from
the issue date to the
sale date
3,000
100,000
Bond Interest Expense
Bal.
0
May 1
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3,000
10–57
Sale of Bonds Between Interest Dates
Illustrated (cont’d)
Katakis Corporation sold $100,000 of 9 percent, 5-year bonds on May 1,
20x4 (after the January 1, 20x4 issue date).
Record first semiannual interest payment:
20x4
July 1
Bond Interest Expense
4,500
Cash (or Interest Payable)
Paid (or accrued) semiannual interest
($100,000 x .09 x 6/12 = $4,500)
Corporation pays
the bondholder
interest for the
entire period
Bond Interest Expense
July 1
0
4,500
Bal.
1,500
Bal.
May 1
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3,000
4,500
The bondholder is
reimbursed for the partial
interest payment made at
time of sale ($3,000) plus
paid interest for the partial
period the bond was held
($1,500)
10–58
Year-End Accrual of
Bond Interest Expense
Bond interest payment dates rarely correspond with a
company’s fiscal year. A year-end adjustment is required.
Katakis Corporation issues $100,000 of 9 percent, 5-year bonds at 104.1 on
January 1, 20x4. The company’s fiscal year ends September 31, 20x4
Interest and amortization were recorded on July 1, 20x4. Three months of interest
has accrued since then.
Record the year-end accrual of bond interest expense:
20x4
Sept. 30
Bond Interest Expense
2,075.50
Unamortized Bond Premium
174.50
Interest Payable
To record accrual of interest on 9%
bonds payable for 3 months and
amortization of ½ of premium for the
second interest payment period
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2,250.00
10–59
Year-End Accrual of Bond Interest
Expense (cont’d)
Record second semiannual interest payment and amortization
of bond premium:
20x5
Jan. 1
Bond Interest Expense
2,075.50
Interest Payable
2,250.00
Unamortized Bond Premium
174.50
Cash
Paid semiannual interest, including
interest previously accrued, and
amortized the premium for the period
since the end of the fiscal year
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4,500.00
10–60