ch15 Bonds Payable and Investments in Bonds 财务会计英文版课件.pptVIP

Bonds (debt)—Interest payments to bondholders are an expense that reduces taxable income. Stock (equity)—Dividend payments are made from after tax net income and retained earnings. Earnings per share on common stock can often be increased by issuing bonds rather than additional stock. Earnings per share $ 1.20 $ 1.50 $ 2.46 Earnings per share $ 0.66 $ 0.42 $ 0.30 A bond contract is called a bond indenture or trust indenture. Long-term debt—repayable 10, 20, or 30 years after date of issuance. Issued in face (principal) amounts of $1,000, or multiples of $1,000. Contract interest rate is fixed for term (life) of the bond. Face amount of bond repayable at maturity date. The Present-Value Concept and Bonds Payable Accounting for Bonds Payable Bond Redemption Investments in Bonds Bond Redemption On June 30, a corporation has a bond issue of $100,000 outstanding on which there is an unamortized premium of $4,000. The corporation purchases one-fourth of the bonds for $24,000. June 30 Bonds Payable 25 000 00 Premium on Bonds Payable 1 000 00 Retired bonds for $24,000. Cash 24 000 00 Gain on redemption of Bonds 2 000 00 2005 Instead, assume that the firm reacquired all of the bonds, paying $105,000. June 30 Bonds Payable 100 000 00 Premium on Bonds Payable 4 000 00 Loss on Redemption of Bonds 1 000 00 Retired bonds for $105,000. Cash 105 000 00 2005 Bonds are purchased directly from the issuing corporation or through an organized bond exchange. Bond prices are quoted as a percentage of the face amount. A premium or discount on a bond investment is recorded in a single investment account and is amortized over the remaining life of the bonds. On April 2, 2005, Purchased a $1,000 Lewis Company bond at 102 plus a brokerage fee of $5.30 and accrued interest of $10.20. Apr. 2 Investment in Lewis Co. Bonds. 1 025 30 Invested in a Lewis Company bond. Cash 1 035 50 2005 Investments in Bonds Interest Revenue 10 20 Note that the brok