Chapter 17 Bonds Payable（课件）-《实用会计英语》同步教学（大连理工大学出版社）

BONDS PAYABLE CHAPTER 17 17-1 2 2 Bonds 1,000 Bond Certificate Investor Firm 17-1 Bonds A bond is a security, usually long-term, representing money borrowed by a corporation from the investing public. Bond Certificate The face value of the bond is $1,000 or some multiple of $1,000. 17-1 Bonds The total number of bonds that are issued at one time is called a bond issue. $10,000 bond issue $1,000 bond $1,000 bond $1,000 bond $1,000 bond $1,000 bond $1,000 bond $1,000 bond $1,000 bond $1,000 bond $1,000 bond The specific terms of a bond issue are specified in a bond indenture. 17-1 Bond Indenture Bond indenture Maturity date Interest payment dates Interest rate Repayment plans restrictions Rights Privileges Limitations It generally determines whether there is a company call the debt, and what is the preference in liquidation in the event of corporate failure. 17-1 Interest Rate and Market Interest Rate Face interest rate market interest rate It is the rate of interest paid to the bondholders based on the face value or principal of the bonds The market interest rate is the rate of interest paid in the market by bond investors for bonds of similar risk. as close as possible to 17-1 Interest Rate and Market Interest Rate Face interest rate ≠ market interest rate Market interest rate ＞Face interest rate The issue price＜Face value The bonds are to be issued at a discount. Market interest rate ＜Face interest rate The issue price＞Face value The bonds are to be issued at a premium. 17-1 Interest Rate and Market Interest Rate To illustrate, let’s look at an example … 17-1 Interest Rate and Market Interest Rate Let’s assume that Anderson Company issues 5-year, 8% bonds. Bonds have a $1,000 face value, and pay interest every six months. 17-1 Interest Rate and Market Interest Rate If the market interest rate is 8% when Anderson Issues its 8% bonds, 1,000 $40 every six months INVESTORS At maturity date, they will also get their $1,0