ACCT-1001EL Final: Accounting final review chater 10
20 Jun 2018
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Chapter 10 - Long-Term Liabilities
Long-Term Liabilities Significance
It is very important for users to have an awareness and understanding of potential
liabilities such as contractual commitments or the possible outcomes of litigation against
the company.
-Long-term loans
-Bonds Payable
-Lease Liabilities
-Pension and other post-employment benefit liabilities
-Future income taxes
Blended Payments — Consists of both interest and principal components, the total
amount paid is the same and are periodically made rather than at the end of of the loan
term. Companies may receive a loan amortization schedule that allocates the amount of
each loan payment.
Interest Expense XXX
Long-term loan payable/Mortgage XXX
Cash XXX
Bonds
Bonds — a formal agreement between a borrower and the lender that specifics how the
borrower is to pay the lender back. All the bonds terms, conditions, restrictions, and
covenants are stated in the indenture agreement.
Contract Rate — Used to calculate the semi-annual interest payment by; Multiplying the
bond interest rate by the face value and dividing by 2 (as the payments are semi-
annual).
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Document Summary
It is very important for users to have an awareness and understanding of potential liabilities such as contractual commitments or the possible outcomes of litigation against the company. Blended payments consists of both interest and principal components, the total amount paid is the same and are periodically made rather than at the end of of the loan term. Companies may receive a loan amortization schedule that allocates the amount of each loan payment. Bonds a formal agreement between a borrower and the lender that speci cs how the borrower is to pay the lender back. All the bonds terms, conditions, restrictions, and covenants are stated in the indenture agreement. Contract rate used to calculate the semi-annual interest payment by; multiplying the bond interest rate by the face value and dividing by 2 (as the payments are semi- annual). Convertible bonds can be exchanged for or converted to a speci ed number of common shares in the company issuing them.
