1. Bonds Payable – Concepts [Link]

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2. Bonds Payable - Measurement and Effective Interest Method [Link]
3. Bonds Payable - Illustrations for Annual Amortization [Link]
4. Bonds Payable - Illustrations for Semi Annual Amortization and Serial Bonds
[Link]
5. Bonds Payable - Illustrations for Bonds Retirement and Review Questions
[Link]
6. Notes Payable [Link]
7. Debt Restructuring [Link]
8. Introduction to Leases PFRS 16 [Link]
9. Leases (PFRS 16) - Books of Lessee: Operating Lease [Link]
10. Leases (PFRS 16) - Books of Lessee: Finance Lease (Concepts)
[Link]
11. Leases (PFRS 16) - Books of Lessee: Finance Lease (Comprehensive Illustrations)
[Link]
12. Leases (PFRS 16) - Books of Lessor: Finance Lease (Concepts)
[Link]
13. Leases (PFRS 16) - Books of Lessor: Direct Finance Lease (Comprehensive Illustrations)
[Link]
14. Leases (PFRS 16) - Books of Lessor: Sales Type Lease (Comprehensive Illustrations)
[Link]
15. Leases (PFRS 16) - Sales and Leaseback [Link]
16. Accounting for Income Tax Part 1 [Link]
17. Accounting for Income Tax Part 2 [Link]
18. Employee Benefits Part 1 [Link]
19. Employee Benefits Part 2 [Link]

Bonds Payable

A bond is a formal unconditional promise, made under seal, to pay a specified sum of money at
a determinable future date;, and to make periodic interest payments at a stated rate until the
principal sum is paid. ‘

It is evidenced by a bond certificate and the contractual agreement between the issuer and
investor is contained in a document known as "bond indenture".

Bond - contract of debt

Debtor - the person who issued the bonds
Creditor - serve as investment yung nagpautang

Bond certificate - this proves that you have investment in bonds on that company. It consists of
various information. Certificate of employment.

1.​ No. of bonds purchased

2.​ Date of purchased
3.​ This certificate signifies that you hold a bond
4.​ The issuer of the bonds

Bond indenture - duties and responsibilities of the two parties, specific provision about the
contract and also the do’s and don’ts. Interest rate, amount of bonds. Employment contract
The following are the different types of bonds:

●​ Term Bonds - ikaw ang nag-issue ng bonds at may bumili. Maturity is one day only.
Isang bagsakan ang payment
●​ Serial Bonds - distributed ang maturity date. To give example the maturity date is every
December 31, 2025 yun din ang date payment.
●​ Mortgage Bonds- sa side ng issuer utang yan, Meron yang collateral na real properties
●​ Collateral Trust Bonds- Ang security is investment property - na possibly na investment
bonds rin
●​ Debenture Bonds- unsecured bonds. Just in case na nag-investment is too risky.
●​ Callable bonds- issuer ng bonds at any point pwede nya bayaran o i-redeeem ang
bonds na na-issue . typically, 3 years ang maturity. Pero pwede na bayaran agad.
●​ Convertible Bonds- the bonds is by substance ng nag issue ( investment ng debt
instrument ) Converted to equity securities
●​ Guaranteed Bonds- yung issuer ng bonds may other party na guarantor na
mababayaran ang investor, kapag hindi nagbayad mababayran sila ng third party
●​ Junk Bonds- mas malaki ang return, higher risk din (possibly hindi mabayaran) ang mga
nag iisue nito ay critical na state ng company.
●​ Coupon Bond (registered or unregistered) - you have something to received which is
interest. It can be given semi-annually or annually.

Registered - pwedeng ibenta sa other party kapag ikaw ang bumili. To issued another
bonds certificate.
Unregistered- yung nagbenta ay hindi nya monitored ang updated holder

●​ Zero-coupon Bonds- no interest to be received annually or semi. But if it has been issue
malaki ang discount. Kumbaga nakuha mo na nong binili [Link] interest

B. Bond Indenture
 A.​ Registered bonds

A.​ Offer return in the form of deep disc, meron pa ring interest revenue kasi amortized sya

Debenture bonds - (P 4,000,000 + 2,500,000 = 6,500,000)

Mortgage bonds - 6,000,000(secured by real property)
Serial bonds - 2,500,000(maturing periodically)
Term bonds - 10,000,000( natiral)
Callable bonds- 4,000,000
Convertible bonds - 6,000,000

Bonds Payable - Measurement and Effective Interest Method

INITIAL MEASUREMENT OF BONDS PAYABLE - present value of the future cash payments to
settle the bond liability

fair value minus transaction costs that are directly attributable to the issuance of bonds

Principle: yung 1,000 mo ngayon pwede domoble after a year or maging 1,100

Fair Value - agreed value

SUBSEQUENT MEASUREMENT OF BONDS PAYABLE either:

❖​ At amortized cost, using the effective interest method( commonly)

❖​ At fair value through profit or loss

The amortized cost of bonds payable is the amount at which the bond liability is measured
initially minus principal repayment, plus or minus the cumulative amortization using the
effective interest method of any difference between the face amount and present value of
the bonds payable.

Can be issued discount or premium and measured periodically.

EFFECTIVE INTEREST METHOD

❖​ Premium on bonds payable, discount on bonds payable, and bond issue cost shall be
amortized using the effective interest method.
❖​ This method distinguishes two kinds of interest rate, namely the nominal rate and
effective rate.
❖​ The nominal rate of interest is appearing on the face of the bond certificate. It is the
interest which the issuing entity periodically pays to the buyer or bondholder.
❖​ The effective rate is the rate that exactly discounts estimated cash future payments
through the expected life of the bonds payable or when appropriate, a shorter period to
the net carrying amount of the bonds payable.
❖​ When bonds are sold at face amount, the effective rate and the nominal rate are the
same.
-​ Nominal rate or stated rate, coupon rate na simply yun yung rate base sa contract
 -​ At premium(discount) ay credit kasi addition sya sa BP. yung nag issue ng ay may gain
. means bawas sa interest expense .

-​ Yung effective interest ay mas mababa sa nominal rate. The selling price is greater than
the face amount.

-​ At discount (contra) ay debit kasi bawas sa bonds payable, pabor sa investor.

-​ Loss sa side ng issuer. Yung interest expense ay mas mataas sa interest payment

❖​ With bonds issue const - issued by BSP

Printing cost and seal

Fees for legal and accounting
Promotion cost
Commission cost
-​ Impact is deduction , always credit in cash
-​ No need to lump and net

At Fair Value, no recognition the ng disc ad premium

-​ Bonds issue cost is expensed outright if fair value option is used

D
 -​ D, kapag silent , amort cost ang gagamitin

B
D

Bonds Payable - Illustrations for Annual Amortization

-​ May additional lang na entry kapag may bond issue cost. Binawasan ang premium.
-​ Adjusted na ang effect ng bond issue cost. Magbabago pa ang interest rate kasi may
impact ang bonds issue cost.
-​ Sa pagcompute ng PV, we are using the market rate or the effective interest rate.
-​ Principal and interest ang involved
CA = 953,567 X EIR (14%)= 967,066.38
Interest Paid = 1,000,000 x 12% = 120,000
Interest expense = 953,567.36 x 14% = 133,499.38
Amort = 120,000 - 133,499.38 = 13,499.38

-​ Mas mataas ang interest expense sa interest payment

Bonds Payable - Illustrations for Semi Annual Amortization and Serial Bonds
-​ Expense outright ang bonds issue cost
-​ 8,000,000 x 95% = 7,600,000
 -​ Loss on credit risk impacts in OCI
-​ Loss on change in FV

SERIAL BONDS

Interest Payment = 3,000,000 x 12%= 360,000

Interest Expense = 3,102,620 x 10%= 310,262
Premium Amort = 360,000 - 310,262 = 49, 738
CA = 3,102,620 - 49, 738 - 1,000,000 ( principal payment) = 2,052,882
Bonds Payable - Illustrations for Bonds Retirement and Review Questions

-​ Kapag nagreretire ang bonds may tinatawag tayong loss.

-​ 2020 - 4,831,200
-​ Mas mataas ang IE compare to IP means discount
Notes Payable
A promissory note is an unconditional promise in writing made by one person to another,
signed by the maker, engaging to pay on demand or at fixed or determinable future time a sum
certain in money to order or to bearer

INITIAL MEASUREMENT OF NOTES PAYABLE

present value of the future cash payments to settle the note payable

fair value minus transaction costs that are directly attributable to the issuance of bonds

SUBSEQUENT MEASUREMENT OF NOTES PAYABLE

Either:

❖​ At amortized cost, using the effective interest method

❖​ At fair value through profit or loss

The amortized cost of bonds payable is the amount at which the bond liability is measured
initially minus principal repayment, plus or minus the cumulative amortization using the effective
interest method of any difference between the face amount and present value of the bonds
payable.
-​ On the date na umutang na discount agad ang interest
-​ Kung magkano yung asset kapag napurchase yun din dapat ang i recognized
-​ Interest for that is amort
-​ Diba may property na on installment basis, ang nangyari jan installment basis ang pinili
ng entity .

-​ Advance ( on the day ng pag-issue ng notes, nagbayad ng first installment )

-​ To comupute the PV of an annuity of 1 in advance at 10% for 5 yrs, simply

1.10/ (2 times)
Equals 4 + 1
= 4.1699
-​ Nag add ng 1 kasi 1 year did not affect the PV
-​ Ordinary annuity good for installment
-​ Goal is to zero- out
758,160 = ( 1,000,000/5 x 3.7908)
= 341,190- 55,881 = 285

C
A

B
= 942,400

1.​ 1M x 10% x 6/12 = 50,000

2.​ 975k
3.​ 1M - 975k = 25k

Debt Restructuring
-​ Alanganing state ang business

1.​ Pangbayad sa utang ay asset

2.​ Pang Bayad sa utang ay shares
3.​ May bintang provision, yung principal amount binago, yung payment madedelay.

-​ Stated at carrying amount

-​ Dapat mas mataas ang liability kaysa sa asset to arrive at gain of extinguishment sa side
ng debtor and loss sa creditor
-​
 -​ 2.8K + 1.4K = 4.2k

1,9000- 1,4000=500,000
-​ Kung 10% at least ng total amount ng old liability (modification)
-​ Usually discount sya
-​ New interest rate ang basis sa pagcompute ng interest pament
-​ Old interest rate ang basis sa pagcompute ng PV
-​ 0.36 ang substantial modification basis ang gain etinging

-​ Carrying amount ng liability and cost ng asset ( asset swap)

-​ 500k
-​ Equity swap
-​ FV ng issue shares / liability/
-​ 4.8k + 250k = 5,050,000 -4, 500,000= 550k

-​ Kapag hindi binigay ang pv, old rate ang gagamitin, determine ang periods
-​ Get the pv
-​ 5,000,000 x 0.77 = 3,850,000
-​ INterest - 13% x 5,000,000 = 650k x