ACCT 1020
Lesson 2 - Chapter 14
Long-Term Liabilities

Introduction

In this chapter you will learn about accounting for long-term liabilities.  You will focus on financing obtained from the issuance of bonds and installment notes.

You will journalize transactions for issuing bonds at par, at a premium, and at a discount.  Additionally, you will account for bond interest and the redemption of bonds.  You will also journalize transactions relating to installment notes and you will learn how to prepare installment note amortization schedules.

Learning Objectives

  1. Describe the advantages and disadvantages of bond financing
  2. Journalize bond transactions including issuance, interest, and redemption
  3. Calculate and journalize bond amortization using the straight-line method
  4. Describe various types of long-term notes payable
  5. Prepare an amortization schedule for installment notes
  6. Journalize transactions relating to long-term notes payable including issuance, interest, and payments

Learning Activities
Achieve the learning objectives by completing each item listed below.

  • Read Chapter 14 of your accounting text.
  • Print and review the Accounting for Bonds Payable handout.
  • Complete the Bond Issue and Amortization sample problem.  You will need Microsoft Excel to fully utilize this sample problem.  Be sure to click the Enable Content button before beginning the problem.
  • Review the Installment Note Amortization presentation.
  • Complete the following Interactive Presentations in Connect.  To see the presentations, click the Expand arrow for Chapter 14 in Connect, then click the link for each presentation and click the Play button.
    • Record Bond Issuance and Interest Expense
    • Record Amortization of Bond Discount
    • Record Amortization of Bond Premium
    • Record Retirement of Bonds

Assessments

  • Assess your knowledge of Long-term Liability Vocabulary. (Flash player required)
  • Complete the homework assigned in Connect.
    • HINT for Exercise 14-15:  Use the attached Installment Note Amortization Schedule to calculate interest expense and the reduction in Notes Payable, then enter the appropriate amounts for the journal entries in Connect.

Summary

In this lesson you learned how to account for certain long-term liabilities.  You journalized transactions relating to bonds and installment notes.  You also created amortization schedules for installment notes with equal total payments.

In the first two lessons, you have accounted for stock and bonds from the issuer's perspective. In the next lesson, you will learn about these items from the investor's perspective as you learn how to account for investments. 

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