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Page 4 of 8 Bond Details | When Bonds Come Due
If the face amount of bond 12.6S2009 were $1,000,000, the $1,000,000 repayment is acknowledged in your reports and spreadsheets in the following manner: Your annual reports from December 31, 2009 would reflect an increase in current debt of $1,000,000 offset by a decrease in long term debt of $1,000,000.
The 2009 spreadsheet will list the bond because you are making decisions on January 1, 2009, when the bond still exists. Your 2010 spreadsheet would show a $1,000,000 increase in current debt and the bond no longer appears. | When Bonds Are Retired Early
A bond with a face amount $10,000,000 could cost $11,000,000 to repurchase early because of fluctuations in interest rates and your credit worthiness. A 1.5% brokerage fee applies. The difference between the face value and the repurchase price will reflect as a gain or loss in the Income Statement’s Fees and Write-offs row. Bond Ratings
If your company has no debt at all, your company is awarded a AAA bond rating. As your debt-to-assets ratio increases, your current debt interest rates increase. Your bond rating slips one category for each additional 0.5% in current debt interest. For example, if the prime rate is 10%, and your current debt interest rate is 10.5%, then you would be given a AA bond rating instead of a AAA.
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