Cost Management
Analysis of Noncurrent Bonds
USD 20.00
Learning Objectives:
- Identify the various terms that are found in a note or bond contract such as face value, stated cash interest rate, and any types of security or covenants.
- Record notes and bonds issued at face value where periodic interest payments are made on dates other than the year-end.
- Explain the handling of notes and bonds that are sold between interest dates and make the journal entries for both the issuance and the first interest payment.
- Identify the characteristics of a zero-coupon bond.
- Explain how interest is earned on a zero-coupon bond.
- Understand the method of arriving at an effective interest rate for a bond.
- Calculate the price of a zero-coupon bond and list the variables that affect this computation.
- Prepare journal entries for a zero-coupon bond using the effective rate method.
- Explain the term “compounding.”
- Describe the theoretical problems associated with the straight-line method and identify the situation in which this method can still be applied.
- Understand the difference between a stated cash interest rate in a debt contract and an effective interest rate negotiated by the debtor and creditor.
- Compute the price of a term bond when the stated cash interest rate is different from the effective interest rate.
- Determine the amount of interest to be compounded each period when the stated cash interest rate is different from effective interest rate.
- Prepare all journal entries for a term bond when the stated cash interest rate is different from the effective interest rate.
- Define a “serial bond.”
- Identify the steps to calculate the price of a bond and provide the proper accounting.
- Record a serial bond over its life.
- Explain the periodic determination of interest for a serial bond and the amount that must be compounded each period.
- Realize that interest payments are frequently made more often than annually such as quarterly or semiannually.
- Determine the stated interest rate, the effective interest rate, and the number of time periods to be used in a present value computation when interest payments cover a period of time other than a year.
- Compute the stated cash interest and the effective interest when interest payments are made more frequently than once each year.
- Prepare journal entries for a bond with interest payments made quarterly or semiannually or at some other period shorter than once each year.
- List and explain the advantages of debt financing.
- List and explain the disadvantages of debt financing.
- Explain and illustrate the use of financial leverage.
- Define “notes” and “bonds” as used in debt financing.
Other course details:
- This is an introductory course that does not require any prerequisite.
- This course can be taken on a standalone basis.
- This course is chapter 14 in the book titled "Financial Accounting".
- It provides 4 PDU (Strategic & Business Management skill) towards your PMP professional development education.
Course Features
Credits:
4 PDU
Skill section:
Strategic & Business Management
Access:
Lifetime
Questions:
20