AC3220 Chapter 14
Terms in this set (14)
A form of debt consisting of separable units (bonds) that obligates the issuing corporation to repay a stated amount at a specified maturity date and to pay interest to bondholders between the issue date and maturity.
document that describes specific promises made to bondholders.
secured only by the "full faith and credit" of the issuing corporation.
the holder is not entitled to receive any liquidation payments until the claims of other specified debt issues are satisfied.
backed by a lien on specified real estate owned by the issuer.
allows the issuing company to buy back, or call, outstanding bonds from the bondholders before their scheduled maturity date.
Sinking fund debentures
bonds that must be redeemed on a prespecified year-by-year basis; administered by a trustee who repurchases bonds in the open market.
more structured (and less popular) way to retire bonds on a piecemeal basis.
bonds for which bondholders have the option to convert the bonds into shares of stock.
arises when bonds are sold for more than face amount.
arises when bonds are sold for less than face amount.
Effective interest method
calculates interest revenue as the market rate of interest multiplied by the outstanding balance of the investment.
Early extinguishment of debt
debt is retired prior to its scheduled maturity date.
Detachable stock purchase warrants
the investor has the option to purchase a stated number of shares of common stock at a specified option price, within a given period of time.
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