【導(dǎo)讀】events.sheet.fromthefirm’scustomers.

　　

【正文】 mineral rights for $ million. And suppose that it is estimated that the mineral deposits will produce 100,000 tons of ore. If 10,000 tons were extracted during the period, 1/10 of the cost is allocated to this period. The entry to record the depletion includes a debit to depletion expense of $150,000 and a credit to accumulated depletion of $150,000. : Preliminary Reading LongTerm Liabilities a: Describe how to report the issuance of longterm debt. Longterm debt represents a legal obligation to repay the amount borrowed, plus interest. Longterm debts are obligations that are expected to result in the use of future expected benefits and result from present obligations not payable within one year or one operating cycle, whichever is longer. All longterm liabilities must be initially recorded at present value of future cash payments. b: Describe how to report interest expense and amortization associated with longterm debt. The accounting entry for bonds issued at par creates bonds payable. Suppose that $1,000,000 of bonds are issued at par. These bonds are recorded as a debit to cash for $1,000,000 and a credit to bonds payable for $1,000,000. For bonds issued at a price above (., at a premium) or below (., at a discount) from face value, the difference must be amortized over life of bond as adjustment of interest expense in the ine statement. A premium or discount can be amortized either using the straightline method (equal amount each period) or the effective interest method (the difference between the interest paid and the effective interest。 effective interest is the market interest rate at the time the bonds were issued multiplied by the carrying value of the bond). ? The accounting entry for bonds issued at a premium requires crediting the unamortized bond premium account. Suppose the $1,000,000 par value bond is issued at a premium of $100,000. The entry includes a debit to cash for $1,100,000 and credits to unamortized bond premium for $100,000 and bonds payable for $1,000,000. ? The accounting entry for bonds issued at a discount requires debiting the unamortized bond discount account. Suppose the $1,000,000 par value bonds are issued at a discount of $100,000. The entry includes debits to cash for $900,000 and unamortized bond discount for $100,000 and a credit to bonds payable for $1,000,000. Example: consider a bond issue of $1,000,000 of 10year bonds that have a coupon rate of 10%, but were issued to yield 9%. Interest is paid semiannually. In this case, the premium is $65,039. Using straightline amortization, the entries for the first semiannual interest is to debit bond interest expense for $46,748, debit unamortized bond premium for $3,252, and credit cash for $50,000. Recognizing that there are 20 interest payments, the amortized amount of the bond premium = $65,039/20 = $3,252. The bond interest expense is puted as a plus figure (., 50,000 3,252 = 46,748). c: Describe how to report the retirement of bonds and the conversion of bonds into mon stock. When a bond reaches its maturity date, the final interest payment is made and the principal is paid in full. A key point is that at maturity, the market value of the bond will equal its book value. This action reduces the cash account and reduces the longterm liability. If a bond is retired prior to maturity, any difference between the market and book value of the bond is treated as an extraordinary gain or loss and is shown on the ine statement. As you will see in later chapters, this gain or loss is shown below the operating line, of tax. Convertible bonds are debt securities that are convertible (exchangeable) into the pany39。s mon stock. For example, if Company X issues convertible bonds with a 10to1 conversion ratio, then each bond may be converted into 10 shares of mon stock. Please note that upon conversion, the pany must issue 10 new shares of mon stock. When the convertible debt is issued, the conversion feature (equity ponent) is ignored and the entire proceeds of the bond issue are treated as a longterm liability. Upon conversion into equity, the bond issue is reclassified from debt into equity on the balance sheet. d: Explain the basic features of such longterm liabilities as longterm leases, mortgages payable, pensions, and other postretirement benefits. Mortgage payable: A mortgage is longterm debt that is secured with real property. In the typical mortgage, even payments are made at regular intervals of time and each payment represents both interest and principal repayment. Leases: Leases represent executory contracts, but a longterm lease mitment may be equivalent to an asset purchase using longterm debt. Leases are often used in an attempt to keep debt off the balance sheet. All leases must be classified as either operating leases or capital leases. Pensions: A pension plan is an agreement under which an employer agrees to pay moary benefits to employees once their period of active service ends. The benefits normally depend on certain requirements, such as age and number of years of service. Other postretirement benefits: Many employers may provide benefits such as life insurance and health care for retirees and their dependents. These benefits differ from pension benefits because they involve coverage or entitlements whose costs are very difficult to estimate. : Preliminary Reading Contributed Capital a: Identify the ponents of contributed capital. Contributed capital consists of the par value of any preferred stock, the par value (if applicable) of mon stock, and paidin capital in excess of par value. ? The par value of a stock is an arbitrary amount. The product of the par value per share and the number of shares issued is the legal capital of the corporation. The par value does not have any relation to the market value of a share of sto