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Chapter 16 - Long-term liabilities. Chapter 16 covers the management issues related to the long-term financing of the corporation. The most important source of long-term financing, bond liabilities, is emphasized, but attention is also paid to other sources, such as leasing, mortgages, and installment notes, and to postretirement benefits. | Long-Term Liabilities Multimedia Slides by: Gail A. Mestas, MAcc, New Mexico State University Chapter 16 Learning Objectives Identify the management issues related to issuing long-term debt. Identify and contrast the major characteristics of bonds. Record the issuance of bonds at face value and at a discount or premium. Learning Objectives (cont’d) Use present values to determine the value of bonds. Amortize bond discounts and bond premiums using the straight-line and effective interest methods. Record bonds issued between interest dates and year-end adjustments. Supplemental Objectives Account for retirement of bonds and the conversion of bonds into stock. Explain the basic features of mortgages payable, long-term leases, and pensions and other postretirement benefits as long-term liabilities. Management Issues Related to Issuing Long-Term Debt Objective 1 Identify the management issues related to issuing long-term debt Long-Term Liabilities are obligations of the business that are | Long-Term Liabilities Multimedia Slides by: Gail A. Mestas, MAcc, New Mexico State University Chapter 16 Learning Objectives Identify the management issues related to issuing long-term debt. Identify and contrast the major characteristics of bonds. Record the issuance of bonds at face value and at a discount or premium. Learning Objectives (cont’d) Use present values to determine the value of bonds. Amortize bond discounts and bond premiums using the straight-line and effective interest methods. Record bonds issued between interest dates and year-end adjustments. Supplemental Objectives Account for retirement of bonds and the conversion of bonds into stock. Explain the basic features of mortgages payable, long-term leases, and pensions and other postretirement benefits as long-term liabilities. Management Issues Related to Issuing Long-Term Debt Objective 1 Identify the management issues related to issuing long-term debt Long-Term Liabilities are obligations of the business that are due to be paid after one year or beyond the normal operating cycle, whichever is longer Long-Term Liabilities (cont’d) How a company finances its operations is the most important factor in the company’s long-term viability The amount and the type of debt a company incurs depend on The nature of the business Its competitive environment The state of the financial markets The predictability of its earnings Reasons and Resources for Long-Term Debt Growing businesses frequently need long-term financing to invest in R&D activities and long-term assets Key sources of long-term funds Issuance of capital stock Issuance of long-term debt such as bonds, notes, mortgages, and leases Management Issues Related to Issuing Long-Term Debt Whether to take in long-term debt How much long-term debt to carry What types of long-term debt to carry How to handle debt repayment The Decision to Issue Long-Term Debt A key management decision regarding long-term funding for the company is Stockholders’ equity .
