Professional Documents
Culture Documents
L T +liabilities
L T +liabilities
BONDS
Bonds are a form of interest-bearing notes payable.
Bonds are normally issued when very large amount of
borrowed funds are required.
-It is transferable.
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If interest on bonds is payable semi-annually the 6 monthly
Interest Expense=Rs 1,147,220/2 = Rs.573,610
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Premium on Bonds____
10,000 | 20,000
(total of all 10 |
Debits in 5 years) |
| Bal. 10,000
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LONG TERM NOTES PAYABLE
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LEASE LIABILITIES
Operating Lease
In operating lease the intent is temporary use of the
property by the lessee while the lessor remains the owner.
So, a simple journal entry to record rent or lease expense is
made. Rent-a-Car charges Rs 36,580 from XY Co. for
renting a car for one week.
DR CR
Car Rental Expense 36,580
Cash 36,580
Capital Lease
-In capital lease the contract transfers most of the risks and
rewards of ownership from lessor to lessee.
-This lease is intended to provide financing to the lessee
for the eventual purchase of the property.
-Therefore the property acquired through this lease should
be recorded by the lessee as an asset at a value equal to the
present value of all future payments.
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ABC CORPORATION
Balance Sheet(partial)
As on 31-12-2010
Long-term liabilities
Bonds payable 10% due on 30/6/2015 $ 1,000,000
Less: Discount on bonds payable __ 80,000
$ 920,000
Mortgage notes payable 11%, due
on 31/3/2020 & secured by land 500,000
Lease liability 440,000
Total long term liabilities $ 1,860,000
NOTE CORRECTION: The date of the Journal Entry should be 30-9-12
and not 30-6-12.