MGMT 351 Lecture 3: Long Term Liabilities
MGMT 351 Lecture 3: Long Term Liabilities MGMT 351
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This 4 page One Day of Notes was uploaded by Emily McIlhattan on Wednesday January 21, 2015. The One Day of Notes belongs to MGMT 351 at Purdue University taught by Byong Ro in Winter2015. Since its upload, it has received 270 views. For similar materials see Intermediate Accounting II in Accounting at Purdue University.
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Date Created: 01/21/15
Lecture 3 NHSNTTIBSI Outline of Last Lecture I Current Liabilities II What are Longterm Liabilities III Types Outline of Current Lecture Continuation of last class I Longterm Notes Payable Current Lecture RECAP I Long Term Notes Payable a Types of NP Traded on debt market 1 Stated rate of interest on note 2 Marketwideyield rate average rates of similar notes Nontrading only stated rate of interest b Measuring NP Interest bearing PVPrice market value at time of issuance PV of interestPV of Face Value Noninterest bearing non interest so theres only a one time payment in the future so PVltFV and note is sold at a discount the discount being the difference between the PV and the FV c Recording NP I ii iii iv vi Issuance Interest Paid At Fiscal Year End Repaid at Maturity 1 All for of these steps regardless of whether the note is sold at discount or premium RsRm PV FV Rs stated interest rate Rm marketwide rate RsltRm PVlt FV vii R5gtRm PVgt FV Example Problems Done lnclass a 1255 Fitzgerald Only 2011 PV at 4111 750000 Take FV All interst Payments Discount rate interest on note so PVFV otherwise you would do 750000055 PVOA1655750kPVS1655 055 being 112 to account for the semiannual interest payments 16 being 8 yrs2 41 Cash 720000 what was actually received Disct on NPay BlCost 30000 Discount on NP Prepaid interest Amortized over the life of the note NPay 750000 Face Value 101 IExp 43125 41250938 Cash 41250 D 750k055 Disct on NPay 1875 l amortization Straight line Amort Used 3000096 mnths 6 mnths 1231 lExp 21563 BVbegDiscount rate FYE lPay 20625 3 month cash interest OctDec Disct on NPay 938 Assume as of 123114 lExp and Amort Were updated 2015 Paid off Note Early 41 lPay 20625 3 months OctDec of 2014 quotExp 20563 Cash 41250 Disct on NPay 938 Amortization NPay 750k Loss on 45000 price paid BV Cash 780000 104750000 What Fitz paid today Disct on NPay 15000 remaining discount bal to be written off HP121 1 PV at 3114 100000 stated rate marketwide so PVFV See the Spreadsheet Not Included 2 311114 Cash 100000 NPay 100000 911114 lExp 5000 10000005 being the yield rate Cash 5000 10000005 being the coupon rate 3 BV at 123114 100000 Face Discount Value there is not Discount FV 0 4 yield rate 8 Now there s a premium R5gtRm PVgt FV PV 108111 See the separate Spreadsheet 311114 Cash 108111 NPay 100000 Prem on NPay 8111 911114 lExp 423444 D 10811104 Prem amort 67556 Cash 5000 BV at 123114 if the mkt rate 8 FV Premium Balance 4 months though so you must adjust 10696661 5 PV