中央财经大学会计专业英语教程4.pptVIP

Bond issued as a premium Example: p 113 Bond premium as reduction in the cost of borrowing We have illustrated how issuing bonds at a discount, increases the cost of borrowing above the amount of the regular cash interest payments. Issuing bonds at a premium, on the other hand, reduces the cost of borrowing below the amount of the regular cash interest payments. Example: p 114 Year-end adjustment for bond interest expense In the preceding illustration, it was assumed that one of the semi-annual dates for payment of bond interest coincided with the end of the company’s accounting year. In most cases, however, the semi-annual interest payment dates will fall during an accounting period rather than on the last day of the year. Example: p 115 Early retirement of bonds payable Bonds are sometimes retired before the maturity date. Most bond issues contain a call provision, permitting the corporation to redeem the bonds by paying a specified price, usually a few points above par. Example: p 116-117 Classification of bonds payable in a balance sheet Bonds payable generally are classified as long-term liabilities, even when the bonds are within one year of maturity for two reasons. If new bonds are issued, the maturing bond liability has been refinanced. Accrued interest payable on long-term bonds is regarded as a current liability. Commercial paper It describes very short-term notes payable issued by financially strong corporations. It is similar to bonds payable in that is split a large loan into small units. It is regarded as a safer and more liquid investment are than stocks or bonds. Lease payment obligations A lease is a contract in which the lesser gives the lessee the right to use an asset for a specified period of time in exchange for periodic rental payments. Operating lease Capital lease In accounting for merchandise “sole” through capital lease, the lesser debits Lease Payments Receivable and credits Sales for an amount equal to the present value of these future