Non-Current Liabilities
Chapter Number Chapter 11
Non-Current Liabilities 1
, 📖 Table of Contents
Outline
11.1 Overview of Bonds
Types of Bonds
Secured and Unsecured Bonds
Convertible and Callable Bonds
Bond Trading
Determining the Market Price of a Bond
11.2 Bond Transactions
Issuing Bonds at Face Value
Discount or Premium on Bonds
Issuing Bonds at a Discount
Issuing Bonds at a Premium
Redeeming Bonds
Redeeming Bonds at Maturity
Redeeming Bonds before Maturity
11.3 Accounting for Non-Current Liabilities
Long-Term Notes Payable
Mortgage notes payable
Lease Liabilities
Accounting for Lease Arrangements
11.4 Reporting & Analyzing Non-Current Liabilities
Analysis
Debt and Equity Financing
11.5 Effective-Interest Method of Bond Amortization
Amortizing Bond Discount
Amortizing Bond Premium
11.6 Straight-Line Amortization
Amortizing Bond Discount
Amortizing Bond Premium
11.1 Overview of Bonds
📍 Bonds are a form of interest-bearing note payable issued by companies,
universities, and governmental agencies.
Non-Current Liabilities 2
, Types of Bonds
Secured and Unsecured Bonds
📍 Secured bonds have specific assets of the issuer pledged as collateral for
the bonds.
→ Real estate: Mortgage Bond
→ Asset: sinking fund bond
📍 Unsecured bonds, also called debenture bonds, are issued against the
general credit of
the borrower.
Convertible and Callable Bonds
📍 Bonds that can be converted into ordinary shares at the bondholder’s
option are convertible bonds.
📍 Bonds that the issuing company can redeem (buy back) at a stated
currency amount (call price) prior to maturity are callable bonds.
Bond Trading
→ Bond prices are quoted as a percentage of the face value of the bond
⚠️ A company makes journal entries only when it issues or buys back
bonds, or when bondholders convert bonds into ordinary shares.
Determining the Market Price of a Bond
You need to determine the present value of the bond
Market price therefore is a function of the three factors that determine present value:
1. the amounts to be received
Non-Current Liabilities 3
Chapter Number Chapter 11
Non-Current Liabilities 1
, 📖 Table of Contents
Outline
11.1 Overview of Bonds
Types of Bonds
Secured and Unsecured Bonds
Convertible and Callable Bonds
Bond Trading
Determining the Market Price of a Bond
11.2 Bond Transactions
Issuing Bonds at Face Value
Discount or Premium on Bonds
Issuing Bonds at a Discount
Issuing Bonds at a Premium
Redeeming Bonds
Redeeming Bonds at Maturity
Redeeming Bonds before Maturity
11.3 Accounting for Non-Current Liabilities
Long-Term Notes Payable
Mortgage notes payable
Lease Liabilities
Accounting for Lease Arrangements
11.4 Reporting & Analyzing Non-Current Liabilities
Analysis
Debt and Equity Financing
11.5 Effective-Interest Method of Bond Amortization
Amortizing Bond Discount
Amortizing Bond Premium
11.6 Straight-Line Amortization
Amortizing Bond Discount
Amortizing Bond Premium
11.1 Overview of Bonds
📍 Bonds are a form of interest-bearing note payable issued by companies,
universities, and governmental agencies.
Non-Current Liabilities 2
, Types of Bonds
Secured and Unsecured Bonds
📍 Secured bonds have specific assets of the issuer pledged as collateral for
the bonds.
→ Real estate: Mortgage Bond
→ Asset: sinking fund bond
📍 Unsecured bonds, also called debenture bonds, are issued against the
general credit of
the borrower.
Convertible and Callable Bonds
📍 Bonds that can be converted into ordinary shares at the bondholder’s
option are convertible bonds.
📍 Bonds that the issuing company can redeem (buy back) at a stated
currency amount (call price) prior to maturity are callable bonds.
Bond Trading
→ Bond prices are quoted as a percentage of the face value of the bond
⚠️ A company makes journal entries only when it issues or buys back
bonds, or when bondholders convert bonds into ordinary shares.
Determining the Market Price of a Bond
You need to determine the present value of the bond
Market price therefore is a function of the three factors that determine present value:
1. the amounts to be received
Non-Current Liabilities 3
