Examples of maturity date in the following topics:
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- The issuer has to repay the nominal amount on the maturity date.
- As long as all due payments have been made, the issuer has no further obligations to the bond holders after the maturity date.
- The length of time until the maturity date is often referred to as the term or maturity of a bond.
- Callability — Some bonds give the issuer the right to repay the bond before the maturity date on the call dates.
- Putability — Some bonds give the holder the right to force the issuer to repay the bond before the maturity date on the put dates.
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- A maturity date is the date when the bond issuer must pay off the bond.
- Typically, bonds stop earning interest after they mature.
- As long as all due payments have been made, the issuer has no further obligations to the bondholders after the maturity date.
- A description of bonds issued including the effective interest rate, maturity date, terms, and sinking fund requirements are included in the notes to financial statements.
- Explain how to record the retirement of a bond at maturity
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- Bonds can be redeemed at or before maturity.
- For bond issuers, they can repurchase a bond at or before maturity.
- Redemption is made at the face value of the bond unless it occurs before maturity, in which case the bond is bought back at a premium to compensate for lost interest.
- Some bonds give the issuer the right to repay the bond before the maturity date on the call dates.
- Some bonds give the holder the right to force the issuer to repay the bond before the maturity date on the put dates.
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- The borrower promises to pay (1) the face value or principal amount of the bond on a specific maturity date in the future, and (2) periodic interest at a specified rate on face value at stated dates, usually semiannually, until the maturity date .
- The bonds are dated 2010 December 31, call for semiannual interest payments on June 30 and December 31, and mature on 2020 December 31.
- On 2010 December 31, the date of issuance, the entry is:
- On 2020 December 31, the maturity date, the entry would be:
- For example, assume the Valley bonds were dated 2010 October 31, issued on that same date, and pay interest each April 30 and October 31.
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- The terms of a note usually include the principal amount, interest rate (if applicable), parties involved, date, terms of repayment (which may include interest), and maturity date.
- Demand promissory notes are notes that do not carry a specific maturity date, but are due on demand by the lender.
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- At maturity, firms should debit cash and credit held to maturity investments the balance of the principal payment.
- The issuer has to repay the nominal amount on the maturity date (which can be any length of time).
- As long as all due payments have been made, the issuer has no further obligations to the bond holders after the maturity date.
- During the life of the debt held to maturity, the company holding the debt will record the interest received at the designated payment dates.
- Summarize the journal entry required to record a debt held to maturity
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- Debt held to maturity is shown on the balance sheet at the amortized acquisition cost.
- The definition of a debt is held-to-maturity is a debt which the company has both the ability and intent to hold until maturity.
- Debt held to maturity is classified as a long-term investment and it is recorded at the market value (original cost) on the date of acquisition.
- All changes in market value are ignored for debt held to maturity.
- Z Company has both the ability and intent to hold the securities until the maturity date.
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- Long-term liabilities are liabilities with a due date that extends over one year, such as a notes payable that matures in 2 years.
- The position of where the debt should be disclosed is based on its maturity date in relation to the due date of other current liabilities.
- For example, a loan for which two payments of USD 1,000 are due--one in the next 12 months and the other after that date--would be split into one USD 1000 portion of the debt classified as a current liability, and the other USD 1000 as a long-term liability (note this example does not take into account any interest or discounting effects, which may be required depending on the accounting rules that may apply).
- Bonds are a form of long-term debt because they typically mature several years after their original issue date.
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- A term bond matures on the same date as all other bonds in a given bond issue.
- Serial bonds in a given bond issue have maturities spread over several dates.
- These contain a provision that gives the issuer the right to call (buy back) the bond before its maturity date, similar to the call provision of some preferred stocks.
- A call premium is the price paid in excess of face value that the issuer of bonds must pay to redeem (call) bonds before their maturity date.
- The bondholder receives the full principal amount on the redemption date.
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- However, unlike with a savings account, whatever funds a consumer puts into a CD generally cannot be withdrawn prior to a certain date without incurring significant penalties.
- Generally only demand CDs or CDs that will mature within three months of when the financial statements are prepared are cash equivalents.
- However, these types of instruments are only included in cash if they mature within three months from when the the financial statements are prepared and there is a minimal risk of these investments losing their value.
- So if a corporate bond matures within three months, but the company that issued it may not be able to settle the debt, one would not be able to include that as a cash equivalent.