After completing this chapter you should be able to: Explain why bonds are issued, prepare the entries for the issuance of bonds and interest expense, describe the entries when bonds are redeemed or converted, describe the accounting for long-term notes payable,.and other contents. | CHAPTER 15 LONG-TERM LIABILITIES Accounting Principles, Eighth Edition Explain why bonds are issued. Prepare the entries for the issuance of bonds and interest expense. Describe the entries when bonds are redeemed or converted. Describe the accounting for long-term notes payable. Contrast the accounting for operating and capital leases. Identify the methods for the presentation and analysis of long-term liabilities. Study Objectives 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information) Issuing bonds at face value Discount or premium Issuing bonds at a discount Issuing bonds at a premium Bonds Basics Accounting for Bond Issues Accounting for Bond Retirements Accounting for Other Long-Term Liabilities Statement Presentation and Analysis Types of bonds Issuing procedures Trading Market value Redeeming bonds at maturity Redeeming bonds before maturity Converting bonds into common stock Long-term notes payable Lease liabilities Presentation Analysis Long-Term Liabilities Service Cost - Actuaries compute service cost as the present value of the new benefits earned by employees during the year. Future salary levels considered in calculation. Interest on Liability - Interest accrues each year on the PBO just as it does on any discounted debt. Actual Return on Plan Assets - Increase in pension funds from interest, dividends, and realized and unrealized changes in the fair market value of the plan assets. Amortization of Unrecognized Prior Service Cost - The cost of providing retroactive benefits is allocated to pension expense in the future, . | CHAPTER 15 LONG-TERM LIABILITIES Accounting Principles, Eighth Edition Explain why bonds are issued. Prepare the entries for the issuance of bonds and interest expense. Describe the entries when bonds are redeemed or converted. Describe the accounting for long-term notes payable. Contrast the accounting for operating and capital leases. Identify the methods for the presentation and analysis of long-term liabilities. Study Objectives 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information) Issuing bonds at face value Discount or premium Issuing bonds at a discount .
