財務(wù)會計概念與應(yīng)用英文版Lecture10課件

1、Chapter 10Long-Term Debt FinancingAlbrecht, Stice, Stice, Swain1COPYRIGHT 2008 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.Present ValuesThe value today of $1 to be received or paid in the future, given

2、a specified interest rate.$90.91 is the present value of $100 received in one year.$90.91$100One Year Period at 10% ratePresent Value2Future ValuesThe value in the future of $1 to be received or paid today, given a specified interest rate.$100 is the future value in one year of $90.91 paid or invest

3、ed today.$90.91$100One Year Period at 10% rateFuture Value3Computing Present ValuesUsing present value tables (Table I):Choose the time period and interest rate used. Multiply the factor by the amount to be received in the future.Period7%8%9%10%12%10.93460.92590.91740.90910.892920.87340.85730.84170.

4、82640.797230.81630.79380.77220.75130.711840.76290.73500.70840.68300.635550.71300.68060.64990.62090.567460.66630.63020.59630.56450.5066$100 X 0.9091 = $90.914Computing Future ValuesUsing future value tables (Table III):Choose the time period and interest rate used. Multiply the factor by the amount i

5、nvested today.Period7%8%9%10%12%11.07001.08001.09001.10001.120021.14491.16641.18811.21001.254431.22501.25971.29501.33101.404941.31081.36051.41161.46411.573551.40261.46931.53861.61051.762361.50071.58691.67711.77161.9738$90.91 X 1.10 = $1005AnnuitiesA series of equal amounts to be received or paid at

6、the end of equal time periods.Present values or future values can be computed for annuities.Use number of periods and rate to find appropriate factor.Multiply the factor by the annuity (payment) amount.Present value factor of annuity (Table II) X Payment = Present value6Notes PayableLong-term debt t

7、hat is paid back at the end of the loan term.Interest is usually paid throughout the loan period.To record a loan from the bank (2 year 10% loan):Cash . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000Notes Payable. . . . . . . . . . . . . . . . .10,000To record the interest for year 1:Inte

8、rest Expense. . . . . . . . . . . . . . . . . . 1,000Cash . . . . . . . . . . . . . . . . . . . . . . . . . 1,000To record the repayment of the loan and year 2 interest:Notes Payable . . . . . . . . . . . . . . . . . . . . 10,000Interest Expense . . . . . . . . . . . . . . . . . .1,000Cash . . . . .

9、 . . . . . . . . . . . . . . . . . . . .11,0007MortgagesA written promise to pay a stated amount of money.Secured by the pledging of certain assets.Liability recorded on the balance sheet is the amount borrowed (which is also the present value of the future payments).A company takes out a 30-year, $

10、100,000 mortgage with monthly payments. The interest rate on the mortgage is 8%. The monthly payments are $733.76: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000Mortgage Payable. . . . . . . . . . . . . . .100,0008Mortgage AmortizationPart of each mortgage payment pays off in

11、terest due and part of the payment reduces the principal amount due. A schedule can be prepared showing the portions of each payment that are principal and interest.InterestPrincipalBalancePayment(Balance X Interest Rate)(Payment Interest) 100,000.00 1 733.76 666.67 67.09 99,932.91 2 733.76 666.22 6

12、7.54 99,865.37 3 733.76 665.77 67.99 99,797.38 4 733.76 665.32 68.44 99,728.93 5 733.76 664.86 68.90 99,660.03 6 733.76 664.40 69.36 99,590.67 9Mortgage AmortizationInterestPrincipalBalancePayment(Balance X Interest Rate)(Payment Interest) 100,000.00 1 733.76 666.67 67.09 99,932.91 2 733.76 666.22 6

13、7.54 99,865.37 3 733.76 665.77 67.99 99,797.38 4 733.76 665.32 68.44 99,728.93 5 733.76 664.86 68.90 99,660.03 6 733.76 664.40 69.36 99,590.67 Recording the payment for month 5:Interest Expense . . . . . . . . . . . . . . . . . . . . . 664.86Mortgage Payable . . . . . . . . . . . . . . . . . . . .68

14、.90Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . .733.7610LeasesCapital leasesAsset and obligation reported on the balance sheet are the present value of the future lease payments.Yearly interest expense based off of remaining lease liability balance (like mortgage amortization).Leased

15、equipment for $10,000 a year, discounted at 14%:Leased Equipment . . . . . . . . . . . . . . . . . . . 52,161Lease Liability. . . . . . . . . . . . . . . . . . . .52,161Record interest expense and first $10,000 payment:Interest Expense . . . . . . . . . . . . . . . . . . . . .7,303Lease Liability .

16、. . . . . . . . . . . . . . . . . . . . . .2,697Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000(Interest expense = 52,161 X 0.14 = 7,303)11BondsBondA contract between the borrowing company (issuer) and the lender (investor) in which the borrower promises to pay a specified amount

17、of interest at the end of each period for which the bond is outstanding. The principal is then paid back at maturity.DebenturesBonds that have no underlying assets pledged as collateral.Secured bondsBonds that have assets pledged as protection for lenders.Registered bondsThe issuing company keeps a

18、record of the names of bondholders. Those registered bondholders are paid interest.Coupon bondsThe issuing company has no record of the bondholders. Current bondholders redeem coupons for interest payments.12More Bond TermsTerm bondsBonds that mature in one single sum on a future specified date.Seri

19、al bondsBonds that mature in a series of installments.Callable bondsBonds that can be redeemed any time at a specified price.Convertible bondsBonds that can be converted to other securities (i.e. preferred stock or common stock) at the option of the bond holder.Zero coupon bondsBonds issued with no

20、promise of payment.Junk bondsHigh-risk bonds issued by a company with a lot of outstanding debt or in a weak financial position.13Characteristics of BondsFace value or maturity valueThe principal amount that will be repaid at maturity.Usually issued in $1,000 increments.Stated rate of interestThe am

21、ount of interest the company promises to pay.Market rate of interestWhat the market is paying for bonds of a similar nature.14Bond IssuanceThe bonds face value and future interest payments (face value X stated rate of interest) are discounted by the market rate of interest to arrive at the issuance

22、price.If the stated rate of interest is LESS than the market rate of interest, the bond is issued at a DISCOUNT.If the stated rate of interest is MORE than the market rate of interest, the bond is issued at a PREMIUM.15Bonds Issued at Face ValueSayer Co. issues $100,000, 5-year bonds with a stated r

23、ate of interest of 10%. The effective rate (market rate of interest) is also 10%.1.Semiannual interest payment . . . . . . . . . . . . 5,000Present value of an annuity of 10 payments of $1 at 5% (Table II) . . . . . . . .X 7.721738,6092. Maturity value of bond . . . . . . . . . . . . . . . . . .100,

24、000Present value of $1 received 10 periodsin the future discounted at 5% (Table I). . . .X 0.613961,3913.Issuance price of bond . . . . . . . . . . . . . . . . . 100,00016Bonds Issued at a DiscountSayer Co. issues $100,000, 5-year bonds with a stated rate of interest of 10%. The effective rate is 12

25、%.1.Semiannual interest payment . . . . . . . . . . . . 5,000Present value of an annuity of 10 payments of $1 at 6% (Table II) . . . . . . . .X 7.360136,8002. Maturity value of bond . . . . . . . . . . . . . . . . . .100,000Present value of $1 received 10 periodsin the future discounted at 6% (Table

26、 I). . . .X 0.558455,8403.Issuance price of bond . . . . . . . . . . . . . . . . . 92,64017Bonds Issued at a PremiumSayer Co. issues $100,000, 5-year bonds with a stated rate of interest of 10%. The effective rate is 8%.1.Semiannual interest payment . . . . . . . . . . . . 5,000Present value of an a

27、nnuity of 10 payments of $1 at 4% (Table II) . . . . . . . .X 8.110940,5542. Maturity value of bond . . . . . . . . . . . . . . . . . .100,000Present value of $1 received 10 periodsin the future discounted at 4% (Table I). . . .X 0.675667,5603.Issuance price of bond . . . . . . . . . . . . . . . . .

28、 108,11418Accounting for BondsBonds issued at face value:Issuance of bond:Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100,000Bonds Payable . . . . . . . . . . . . . . . . . . .100,000Make semiannual interest payment:Interest Expense . . . . . . . . . . . . . . . . . . . . .5,00

29、0Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,000Retirement of bond:Bonds Payable . . . . . . . . . . . . . . . . . . . . . . .100,000Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . .100,00019Early Retirement of BondsBonds are sometimes retired before maturity. The differ

30、ence between the face value and the price paid to retire the bonds is recognized as a gain or loss.Retirement of Sayer Co. bond at 105:Bonds Payable . . . . . . . . . . . . . . . . . . . . . . .100,000Loss on Bond Retirement . . . . . . . . . . . . . .5,000Cash . . . . . . . . . . . . . . . . . . .

31、. . . . . . . . .105,00020Debt-Related Financial RatiosDebt ratioRepresents the amount of assets financed through debt.Debt-to-equity ratioThe number of dollars of debt for every dollar invested by stockholders.Total LiabilitiesTotal AssetsTotal LiabilitiesTotal Stockholders Equity21Times Interest E

32、arnedTimes Interest Earned RatioThe ratio of the income that is available for interest payments.Measures how much a cushion has in making its interest payments.The higher the better.Earnings Before Interest and TaxesInterest Expense22Bonds Issued at a Discount or PremiumUsing the Sayer Co. examples,

33、Bonds issued at a discount:Bonds issued at a premium:Issuance of bonds:Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92,640Discount on Bonds . . . . . . . . . . . . . . . . . . .7,360Bonds Payable . . . . . . . . . . . . . . . . . . .100,000Issuance of bonds:Cash . . . . . . . .

34、. . . . . . . . . . . . . . . . . . . . . . .108,114Premium on Bonds. . . . . . . . . . . . . . . .8,114Bonds Payable . . . . . . . . . . . . . . . . . . .100,00023Straight-Line AmortizationThe discount or premium needs to be amortized over the life of the bond so the value of the bond is equal to t

35、he face value at maturity.Straight-line amortizationDivide the discount or premium by the number of interest periods and recognize that amount as extra interest expense (for discounts) or less interest expense (for premiums).24Straight-Line AmortizationBonds issued at a discount:The same entry would

36、 be made for each interest payment.A similar entry would be made to amortize a premium, but the premium would be debited and interest expense would be reduced.Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,360Number of semiannual periods . . . . . . . . . . 10736Payment of semi

37、annual interest:Interest Expense. . . . . . . . . . . . . . . . . . . . . . .5,736Discount on Bonds . . . . . . . . . . . . . . . . .736Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,00025Effective Interest AmortizationAmortizes a varying amount of discount or premium each period.This amount is the difference between the interest actually incurred and the cash actually paid (like the amortization sch