Examples Of Long Term Financial Liabilities

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Long term financial liabilities (chapter 14)
Note payables
If non-interest bearing, record at Present value (PV) - similar accounting for short term notes (see Chp 13).
DR Asset = cash equivalent of received CR Note payable = PV
If Journal entry does not balance, determine the account
Effective interest method to calculate interest expense Steps:
1. DR interest expense (CV x market rate x #/12).
2. CR Cash or interest payable (if accruing) = cash amount to be paid (face value x coupon rate x #/12), if any
3. Balance the journal entry with amortization of the note payable

Bonds Payable:
Record cash and B/P at present value (PV). Sold at a premium if market rate < bond rate; discount if market rate > bond rate.
PV – face value = discount or premium
Types p. 886; Terms – see page 890
If purchased between dates, add accrued interest to cash received and CR interest payable (see example page 892)
Accrue interest at each reporting date if not the same as payment date (see example pages 895-896
IFRS: Effective interest method to calculate interest expense Steps:
1. CR Cash or Interest payable (accruing) = cash amount to be paid (face value x coupon rate x #/12)
2. DR interest expense (CV x market rate x #/12).
3. Balance the journal entry with amortization of the bond payable

ASPE: Policy choice of method: effective interest or straight-line method
Straight-line method Steps:
1. CR Cash or Interest payable (accruing) = cash amount to be paid (face value x coupon rate x #/12)
2. DR/CR amortization of discount/premium = (total discount or premium divided by n)
3. DR interest expense to balance the journal entry

De-recognition/Retirement of bonds prior to maturity.
First, record interest expense, amortize bond and pay cash earned to date to retiring bondholders.
Next remove
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