Long Term Debt Flashcards
Entries for sale of bonds issued at par
Entry at issue date
Dr. Cash
Cr. Bonds Payable
Interest payments
Dr. Interest expense
Cr. Cash
Entries for sale bonds at at discount
Entries at issue date
Dr. Cash
Dr. Discount on bonds
Cr. Bonds payable
Interest Payments
Dr. Interest expense
Cr. Discount on bonds
Cr. Cash
Entries for sale of bonds on a premium
Entries at issue date
Dr. Cash
Cr. Premium on Bonds
Cr. Bonds Payable
Interest Payments
Dr. Interest Expense
Dr. Premium on Bonds
Cr. Cash
Journal entries for early retirement of debt
Dr. Bonds payable - Face Value Dr. Premium - unamortized Dr. Loss Cr. Bond Issue costs - unamortized Cr. Discount - unamortized Cr. Cash - market price Cr. Gain
Net carrying amount for calculating gain or loss on early retirement of debt
Face value minus amortized portion of issue costs & discount(Premium?)
Unamortized portion when calling half a bond
Remember to subtract the unamortized portion from the full amount then multiply it by 50%
One way to tell if restructure of troubled debt
Creditor receives stream of cash flow with present value less than what is owed to him
What value do you base gain or loss on for troubled debt
Book Value not FV
Do you recognize a gain in a type 2 restructure
No gain recognized because you are using a new interest rate
Put options and losses
They offset the loss
Journal entry for put options with fixed dollar amount
Date of agreement
Dr. Expense
Cr. Liability for stock issuance
At Completion
Dr. Liability for stock issuance
Cr. Common Stock
Cr. Apic
Common stock equals Fixed amount divided by market value of price after
Journal entry for put options with fixed number of shares
Date of agreement
Dr. Service
Cr. Stock Issuance obligation
At completion
Dr. Stock issuance obligation
Cr. Common stock
Cr. Apic
Common stock is par value given and apic is the remainder and value of obligation is the price “at the time” not after
