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CHAPTER 14 – LONG-TERM LIABILITIES [pages 782-840`]

LEARNING OBJECTIVES

1. Describe the formal procedures associated with issuing long-term debt. 2. Identify various types of bond issues. 3. Describe the accounting valuation for bonds at date of issuance. 4. Apply the methods of bond discount and premium amortization. 5. Describe the accounting for the extinguishment of non-current liabilities. 6. Explain the accounting for long-term notes payable. 7. Describe the accounting for the fair value option 8. Explain the reporting of off-balance-sheet financing arrangements. 9. Indicate how to present and analyze long-term debt. *10. Describe the accounting for a debt restructuring.
*Material covered in Appendix

I. Overview – Long-term Liabilities (Bonds and Notes Payable)

A. What is long-term debt? 1. probable future sacrifices of economic benefit

2. payable in the future, normally beyond one year or operating cycle whichever is longer

3. Examples: bonds payable, long-term notes payable, mortgage notes payable (topics of this chapter), pension liabilities and lease obligations.

B. Why issue long-term debt (as opposed to equity)? 1. May be only source of funds

2. Lower cost

3. Interest payments are tax deductible

4. Creditors have no right to vote

5. Takes advantage of financial leverage

II. Bonds Payable A. Contract (obligation) called a bond indenture 1. to pay a sum of money

2. at a designated maturity date plus periodic interest

3. at a specified rate on the face value.

4. Repay principal at maturity

B. Types of Bonds: term, serial, secured and unsecured, convertible, commodity-backed, deep discount, registered and coupon bonds.

C. Issuing of Bonds 1. Can be through an

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