Army Libraries catal Login for UIUs ESenDSST Principles of

Army Libraries : catal Login for UIU\'s E-SenDSST Principles of f Bookstore- Peacock upperiowa /d2l/le/55352/discussions/List Weekly Discussion Topic Week 2 Discussion v Available: Monday, July 16, 2018 12:00 AM CDT - Sunday, July 22, 2018 11:30 PM CDT. Fleeson Company needs additional funds to purchase equipment for a new production facility and is considering either issuing bonds payable or borrowing the money from a local bank in the form of an installment note. How do installment note differ from a bond payable?

Solution

A bonds payable is a type of note in which a company agrees to pay the holder i.e. the bank the face value at the maturity date and usually to pay interest periodically at a specified rate on the face value.

An installment note requires the borrower to make equal periodic payments to the lender for the term of the note. Unlike bonds, the annual payment in an installment note consists of both principal and interest.

Thus if Fleeson company purchases the equipment using installment note, then it has to pay equal annual installment for the term of the note.