A corporation often incurs long-term debt in order to finance the acquisition of property, plant, and equipment or other capital assets. This debt may take the form of a bond issue, a bank loan, or a finance lease. Bank loans and finance leases were covered in Chapter 9. This chapter discusses in more detail the means to finance operations by issuing bonds.
Learning Objectives
LO1 – Describe the nature of bonds and the rights of bondholders.
LO2 – Describe how bonds, premiums and discounts are recorded in the accounting records and disclosed on the balance sheet.
LO3 – Describe and calculate how bond premiums and discounts are amortized.
LO4 – (Appendices) Describe and calculate the effective interest method of amortization and explain how this differs from the straight-line amortization method.
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