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acct chapter 10 vocab
Terms in this set (24)
Effective-interest method of amortization
A method of amortizing bond discount or bond premium that results in periodic interest expense equal to a constant percentage of the carrying value of the bonds.
Rate established when bonds are issued that maintains a constant value for interest expense as a percentage of bond carrying value in each interest period.
Straight-line method of amortization
A method of amortizing bond discount or bond premium that allocates the same amount to interest expense in each interest period.
A legal document that indicates the name of the issuer, the face value of the bonds, and other data such as the contractual interest rate and the maturity date of the bonds.
A form of interest-bearing notes payable issued by corporations, universities, and governmental entities.
Bonds that the issuing company can redeem (buy back) at a stated dollar amount prior to maturity.
Events with uncertain outcomes that may represent potential liabilities.
contractual intrest rate
Rate used to determine the amount of interest the borrower pays and the investor receives.
Bonds that can be converted into common stock at the bondholder's option.
A debt that a company reasonably expects to pay (1) from existing current assets or through the creation of other current liabilities, and (2) within one year or the operating cycle, whichever is longer.
discount on a bond
The difference between the face value of a bond and its selling price when a bond is sold for less than its face value
Amount of principal due at the maturity date of the bond.
long term liabilities
Obligations that a company expects to pay more than one year in the future.
market interest rate
The rate investors demand for loaning funds to the corporation.
The date on which the final payment on a bond is due from the bond issuer to the investor.
mortgage note payable
A long-term note secured by a mortgage that pledges title to specific assets as security for the loan.
An obligation in the form of a written note.
off balance sheet financing
The intentional effort by a company to structure its financing arrangements so as to avoid showing liabilities on its balance sheet.
premium on a bond
The difference between the selling price and the face value of a bond when a bond is sold for more than its face value.
The value today of an amount to be received at some date in the future after taking into account current interest rates.
Bonds that have specific assets of the issuer pledged as collateral.
times interest earned
A measure of a company's solvency, calculated by dividing the sum of net income, interest expense, and income tax expense by interest expense.
time value on money
The relationship between time and money. A dollar received today is worth more than a dollar promised at some time in the future.
Bonds issued against the general credit of the borrower.
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