Intermediate Accounting - Liabilities & Debt Financing

Course Description:

This course includes current and long term liabilities. Debt financing including notes, mortgages, lines of credit and bonds is presented. Bond issue costs, amortization of premiums and discounts, retirement and conversion of bonds are covered. Accounting for troubled debt restructuring as well as contingencies are presented. Leases and criteria for capital and operating types as well as advantages are discussed from the standpoint of lessor and lessee.

Students will Learn:

  • To account for short-term debt obligations, apply present value concepts to long term debts.
  • To understand the accounting issues faced by an asset owner (lessor) and the asset user (lessee) in recording a lease transaction.
  • To apply the lease classification criteria in order to distinguish between capital and operating leases.
  • How to compute performance bonuses
  • How to recognize the issues associated with postemployment benefits.
  • To account for payroll and payroll taxes.

Course Modules:

Module 1 – Debt Financing – Short and Long Term, Notes Payable, & Payroll Liabilities

Debt Financing - Short Term and Long Term

  • Learning Objective: Develop knowledge on characteristics and classification of liabilities and short-term debt, show ability to use FASB codification, master the elements of debt financing: notes payable, lines of credit, and long-term debt, compute present value of long-term debt.

Short Term Liabilities – Payroll

  • Learning Objective: Understand the concepts of payroll withholdings and payroll taxes for short-term liabilities, demonstrate computational ability for payroll withholdings and payroll taxes, analyze the implications of compensated absences.

Module 2 – Debt Financing – Bonds, Issuing Premiums, & Discounts

Debt Financing – Bonds

  • Learning Objective: Identify the advantages and disadvantages of bonds, master essential bond terms, understand the principles of financing with bonds, recognize the different selling prices of bonds: par, premium and discount, develop knowledge on issuance of bonds.

Debt Financing - Methods and Premiums

  • Learning Objective: Analyze the implications of bond issue costs, bonds issued between interest dates, and straight line method, compute and assess the premium and discount effect on statement of cash flows, understand the usefulness of retiring bonds at maturity, test knowledge of bonds with debt ratio calculations.

Module 3 – Debt Financing: Extinguishment of Debt, Convertible Bonds, & Bond Refinancing

Debt Financing: Extinguishment of Debt Prior to Maturity

  • Learning Objective: Evaluate purchase and call for the retirement of bonds before maturity, identify the useful features of issuance and conversion of convertible bonds, define bonds refinancing, test computational skills of bond refinancing, analyze useful techniques for off-balance-sheet financing.

Debt Financing: Troubled Debt Restructuring (continued)

  • Learning Objective: Assess the proceedings of troubled debt restructuring and transfer of assets in full settlement, compute and prepare journal entry for grant of equity interest (equity swap), understand the various way debt terms have the ability to be modified to aid a debtor.

Module 4 – Contingencies & Lease Accounting

Contingencies Including Warranties

  • Learning Objective: Analyze the essential components of contingencies: losses & liabilities, lawsuits, premiums & coupons, and warranties, demonstrate knowledge of the obligations for environmental liabilities, calculate liability for premiums & coupons.

Introduction to Leases

  • Learning Objective: Differentiate the role between lessee and lessor, identify key accounting issues for lessor, understand the various types of leases, master lease contract provisions along with the general classification criteria for lessee and lessor, demonstrate accounting skills for operating leases.

Module 5 – Lessee vs. Lessor

Leases – Lessee

  • Learning Objective: emonstrate accounting ability when making calculations for capital leases, understand accounting principles for leases with a bargain purchase option, and assess the treatment of leases on lessee’s statement of cash flows.

Leases – Lessor

  • Learning Objective: Develop knowledge on the economic advantages of a lessor, engage in payment computations for a lessor, understand the classification of leases by the lessor, analyze the facets of sales-type leases, initial direct costs, and sale-leasebacks, demonstrate accounting skills to solve problems using lessee and lessor principles.

Recommended Background:

  • Business undergraduates or MBA students with an accounting or finance focus.

Other Courses in the Series:

Badge Awarded: 

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