ACCT 1510 Chapter Notes - Chapter 9: Finance Lease, Effective Interest Rate, Accrual
8 Apr 2016
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Long-term debt obligations that extend beyond one year. Notes payable issued in exchange for a noncash asset such as equipment. Bond a type of note that requires the issuing entity to pay the face value of the bond to the holder when it matures and usually to pay interest periodically at a specified rate. All such contracts require the borrower to repay the face value. Most debt contracts also require that the borrower make regular interest payments. The amount of each interest payment can be calculated from the face amount, the interest rate, and the number of payments per year: face value x interest rate x time (in years) = interest. Borrowing through the use of notes or bonds is attractive to business as a source of money because the relative cost of issuing debt is often lower than the cost of issuing equity.
