Bonds-Payable-and-Investments-in-Bondsppt課件教學(xué)教程

1、Learning ObjectivesPower Notes1.Financing Corporations2.Characteristics of Bonds Payable3.The Present-Value Concept and Bonds Payable4.Accounting for Bonds Payable5.Bond Sinking Funds6.Bond Redemption7.Investments in Bonds8.Corporation Balance Sheet9.Financial Analysis and InterpretationChapter F13C

2、13 Bonds Payable and Investments in Bonds Long-Term Financing Characteristics of Bonds Payable Time Value of Money Issuing Bonds Payable Redemption of Bonds Payable Investments in Bonds Number of Times Interest EarnedSlide #Power Note Topics391728343536 Note: To select a topic, type the slide # and

3、press Enter.Power NotesChapter F13 Bonds Payable and Investments in Bonds Two Methods of Long-Term Financing Resources = Sources StockholdersEquityAssetsLiabilitiesTwo Methods of Long-Term Financing Resources = Sources StockholdersEquityAssetsLiabilities Equity Financing Stockholders Two Methods of

4、Long-Term Financing Resources = Sources StockholdersEquityAssetsLiabilitiesBondholders Equity Financing Stockholders Debt Financing Bondholders Two Methods of FinancingBondholdersBonds (debt) Interest payments to bondholders are an expense that reduces taxable income.Stock (equity) Dividend payments

5、 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. Why issue bonds rather than stock?StockholdersAlternative Financing Plans $800,000 EarningsPlan 1Plan 2Plan 312 % bonds$2,000,000Preferr

6、ed 9% stock, $50 par$2,000,0001,000,000Common stock, $10 par$4,000,0002,000,0001,000,000Total$4,000,000$4,000,000$4,000,000Earnings before interest and income tax$ 800,000$ 800,000$ 800,000Deduct interest on bonds240,000Income before income tax$ 800,000$ 800,000$ 560,000Deduct income tax320,000320,0

7、00224,000Net income$ 480,000$ 480,000$ 336,000Dividends on preferred stock180,00090,000Available for dividends$ 480,000$ 300,000$ 246,000Shares of common stock 400,000 200,000 100,000Earnings per share$ 1.20$ 1.50$ 2.46Alternative Financing Plans $440,000 EarningsPlan 1Plan 2Plan 312 % bonds$2,000,0

8、00Preferred 9% stock, $50 par$2,000,0001,000,000Common stock, $10 par$4,000,0002,000,0001,000,000Total$4,000,000$4,000,000$4,000,000Earnings before interest and income tax$ 440,000$ 440,000$ 440,000Deduct interest on bonds240,000Income before income tax$ 440,000$ 440,000$ 200,000Deduct income tax176

9、,000176,00080,000Net income$ 264,000$ 264,000$ 120,000Dividends on preferred stock180,00090,000Available for dividends$ 264,000$ 84,000$ 30,000Shares of common stock 400,000 200,000 100,000Earnings per share$ 0.66$ 0.42$ 0.30Characteristics of Bonds PayableLong-term debt repayable 10, 20, or 30 year

10、s 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.Bond Variables and Constants1. Constants fixed by bond contract.a.Principal (face) amount.b.Contrac

11、t rate of interest.c.Term (life) of the bond.2.Variables determined in the bond market.a.Market price of the bond.b.Market (effective) interest rate.How are Bond Prices Determined1. Present Value of Face AmountThe present value of the face amount (constant) of the bond at its maturity date, based on

12、 the current market interest rate (variable).2. Present Value of Interest PaymentsThe present value of the periodic interest payments (constant) for the term of the bonds, based on the current market interest rate (variable).The selling price of bonds are based on two amounts.Market and Contract Int

13、erest RatesDifferences in market and bond contract interest rates result in Discounts and Premiums.WhenBonds sell atMarket rate = Contract rateMarket rate Contract rateMarket rate Contract rateFace value Discount PremiumCash Flow of Bonds PayableCash Outflows:Interest payments$ 60,000=$ 43,133 (10 p

14、eriods at $6,000)Face amount100,000=53,273 (at end of 5 years)$160,000=$96,403Cash Inflows:Selling proceeds$ 96,406=$96,406Present ValuesOn January 1, $100,000 of 12%, five-year bonds, with interest of $6,000 payable semiannually are issued. Market rate is 13% at date of issue.Cash Flow of Bonds Pay

15、ableCash Outflows:Interest payments$ 60,000=$ 43,133 (10 periods at $6,000)Face amount100,000=43,133 (at end of 5 years)$160,000=$96,403Cash Inflows:Selling proceeds$ 96,403=$96,403Present ValuesOn January 1, $100,000 of 12%, five-year bonds, with interest of $6,000 payable semiannually are issued.

16、Market rate is 13% at date of issue.Present value of an annuity of $6,000 for 10 periods at a market rate of 6.5% per period is $43,133.Payment x Factor = Present Value $6,000 x 7.1888 = $43,133 Cash Flow of Bonds PayableCash Outflows:Interest payments$ 60,000=$ 43,133 (10 periods at $6,000)Face amo

17、unt100,000=53,273 (at end of 5 years)$160,000=$96,403Cash Inflows:Selling proceeds$ 96,403=$96,403Present ValuesOn January 1, $100,000 of 12%, five-year bonds, with interest of $6,000 payable semiannually are issued. Market rate is 13% at date of issue.Present value of $100,000 paid at the end of 10

18、 six-month periods at a market rate of 6.5% per period is $53,273.Payment x Factor = Present Value$100,000 x .53273 = $53,273Cash Flow of Bonds PayablePresent ValuesOn January 1, $100,000 of 12%, five-year bonds, with interest of $6,000 payable semiannually are issued. Market rate is 13% at date of

19、issue.Cash Outflows:Interest payments$ 60,000=$ 43,133 (10 periods at $6,000)Face amount100,000=53,273 (at end of 5 years)$160,000=$96,406Cash Inflows:Selling price $96,406The Time Value of Money Future ValueThe time value of money concept is used in many business decisions. This concept is an impor

20、tant consideration in accounting for bonds payable.PresentValueFutureValue$1,000$ ?What is the future value of $1,000 invested today (present value) at 8% per year?The Time Value of Money Future ValueThe time value of money concept is used in many business decisions. This concept is an important con

21、sideration in accounting for bonds payable.PresentValueFutureValue$1,000= $1,000 + ($1,000 x 8%)= $1,000 x 108% or 1.08What is the future value of $1,000 invested today (present value) at 8% per year?$1,080The Time Value of Money Present ValueThe time value of money concept is used in many business

22、decisions. This concept is an important consideration in accounting for bonds payable.PresentValueFutureValue$ ?What is the present value of $1,000 to be received one year from today at 8% per year? $1,000The Time Value of Money Present ValueThe time value of money concept is used in many business d

23、ecisions. This concept is an important consideration in accounting for bonds payable.PresentValueFutureValue$ 925.93= $1,000 / 108% or 1.08What is the present value of $1,000 to be received one year from today at 8% per year? $1,000Calculating Present ValuesPresent values can be determined using pre

24、sent value tables, mathematical formulas, calculators or computers. Present value of $1 with Compound Interest1.9434=$1.0000/ 1.06CalculatorPV TablePeriod 6%One dollar at the end of one period at 6% per period is equal to $.9434 today (present value).Calculating Present ValuesPresent values can be d

25、etermined using present value tables, mathematical formulas, calculators or computers. Present value of $1 with Compound InterestPV TablePeriod 6%One dollar at the end of two periods at 6% per period is equal to $.8900 today (present value).To use the value from the prior period as the starting poin

26、t, dont clear your calculator.1.9434=$1.0000/ 1.062.8900=$ .9434/ 1.06CalculatorCalculating Present ValuesPresent values can be determined using present value tables, mathematical formulas, calculators, or computers. Present value of $1 with Compound InterestPV TablePeriod 6%One dollar at the end of

27、 three periods at 6% per period is equal to $.8396 today (present value).1.9434=$1.0000/ 1.062.8900=$ .9434/ 1.063.8396= $ .8900/ 1.06CalculatorCalculating Present ValuesPresent values can be determined using present value tables, mathematical formulas, calculators or computers. Present value of $1

28、with Compound Interest1.9434=$1.0000/ 1.062.8900=$ .9434/ 1.063.8396= $ .8900/ 1.064.7921= $ .8396/ 1.065.7432= $ .7921/ 1.066.7050= $ .7432/ 1.06PV TablePeriod 6%When using a calculator, learn to use constant division. You will then enter $1 and 1.06 the first time, pressing only the equal (=) key

29、for each successive answer.CalculatorCalculating Present Values of AnnuitiesPresent value of $1 Annuity of $1PV TableAnnuity Period 6% 6%CalculationSum of Periods1.9434.9434= Period 12.89001.8334= Periods 123.83962.6730 = Periods 134.79213.4651 = Periods 145.74324.2124 = Periods 154.2124The PV of an

30、 annuity of $1 to be received each year for two years is $1.8334. This is the sum of the PV of the two amounts for periods 1 and 2.Annuities represent a series of equal amounts to be paid or received in the future over equal periods.Calculating Present Values of AnnuitiesPresent value of $1 Annuity

31、of 1$PV TableAnnuity Period 6% 6%CalculationSum of Periods1.9434.9434= Period 12.89001.8334= Periods 123.83962.6730 = Periods 134.79213.4651 = Periods 145.74324.2124 = Periods 154.2124The PV of an annuity of $1 to be received each year for three years is $2.6730. This is the sum of the PV of the thr

32、ee amounts for periods 13.Annuities represent a series of equal amounts to be paid or received in the future over equal periods.Calculating Present Values of AnnuitiesAnnuities represent a series of equal amounts to be paid or received in the future over equal periods.Present value of $1 Annuity of

33、1$PV TableAnnuity Period 6% 6%CalculationSum of Periods1.9434.9434= Period 12.89001.8334= Periods 123.83962.6730 = Periods 134.79213.4651 = Periods 145.74734.2124 = Periods 154.2124TotalCash100,000Bonds Payable100,000 PV of face due in 5 years ($100,000 x 0.55840) = $55,840 PV of $1 for 10 periods a

34、t 6% PV of 10 interest payments ($6,000 x 7.36009) = 44,160 PV of annuity of $1 for 10 periods at 6%Total selling price= $100,000 DateDescriptionDebitCreditBonds Issued at Face AmountJan. 1Issued 12%, five-year bonds at face.On January 1, $100,000 of 12%, five-year bonds, with interest of $6,000 pay

35、able semiannually are issued. Market rate is 12% at date of issue. DateDescriptionDebitCreditBonds Issued at a DiscountCash96,406Discount on Bonds Payable3,594Bonds Payable100,000 PV of face due in 5 years ($100,000 x 0.53273) = $53,273 (PV of $1 for 10 periods at 6.5%) PV of 10 interest payments ($

36、6,000 x 7.18883) =$43,133 (PV of annuity of $1 for 10 periods at 6.5%)Total selling price=$96,406Jan. 1Issued 12%, five-year bonds at a discount.On January 1, $100,000 of 12%, five-year bonds, with interest of $6,000 payable semiannually are issued. Market rate is 13% at date of issue. DateDescripti

37、onDebitCreditAmortization of a Bond DiscountInterest Expense6,359.70Discount on Bonds Payable359.70Cash6,000.00Jan. 1Issued 12%, five-year bonds at a discount.The straight-line method amortizes bond discount in equal periodic amounts. Cash96,406Discount on Bonds Payable3,594Bonds Payable100,000Payme

38、nt of semiannual interest andamortization of 1/10 of bond discount.Jun. 30 DateDescriptionDebitCreditBonds Issued at a PremiumCash103,769 Bonds Payable100,000Premium on Bonds Payable3,769 PV of face due in 5 years ($100,000 x 0.58543) = $ 58,543 (PV of $1 for 10 periods at 5.5%) PV of 10 interest pa

39、yments ($6,000 x 7.53763) =45,226 (PV of annuity of $1 for 10 periods at 5.5%)Total PV (selling price)= $103,769Jan. 1Issued 12%, five-year bonds at a premium.On January 1, $100,000 of 12%, five-year bonds, with interest of $6,000 payable semiannually are issued. Market rate is 11% at date of issue.

40、 DateDescriptionDebitCreditAmortization of a Bond PremiumInterest Expense5,623.10Premium on Bonds Payable376.90Cash6,000.00Jan. 1Issued 12%, five-year bonds at a premium.The straight-line method amortizes bond premium in equal periodic amounts. Cash103,769 Bonds Payable100,000Premium on Bonds Payabl

41、e3,769Payment of semiannual interest andamortization of 1/10 of bond premium.Jun. 30 DateDescriptionDebitCreditZero-Coupon BondsCash53,273Discount on Bonds Payable46,727Bonds Payable100,000 PV of face due in 5 years ($100,000 x 0.53273) = $53,273 (PV of $1 for 10 periods at 6.5%)An investment of $53

42、,273 today would yield $100,000 in five years compounded semiannually at 6.5%. Jan. 1Issued $100,000 five-year zero-coupon bonds.Zero-coupon bonds do not provide for interest payments. Only the face amount is paid at maturity. Assume market rate is 13% at date of issue. DateDescriptionDebitCreditBond RedemptionBonds Payable25,000Premium on Bonds Payable1,000Gain on Redemption of Bonds2,000Cash24,000Redeemed one-fourth of the total b