COM 270 Chapter 10: PDF COM 270 Notes - Ch. 10
15 Mar 2017
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Mortgages: long-term debt with land, building, or piece of equipment (capital asset) pledged as collateral or security for the loan: nancing agreement: agreement between the company. & lender, specifying the terms of the loan: generally shorter term length (1-5 years, usually structured as an instalment loan. Instalment loans: loan principle repayments must be made periodically, rather than at the end of the loan term, resulting in blended payments. Balloon payment: a single, large payment at the end of period. Must account for 2 basic transactions & keep track of interest. & principle amounts: (i) initial borrowing - date loan is obtained: [credit long-term loan/mortgage payable 8492$] (ii) periodic loan payment - made on payment dates: [credit cash 8492$: covenants: certain conditions or restrictions that the borrower must meet during the loan period, in order to protect the lender against the borrower defaulting on the loan.
