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Bond interest paid by a corporation in an expense, whereas dividends paid are not an expense of the corporation
A debenture bond is an unsecured bond which is issued against the general credit of the borrower
A 10% stock dividend is the equivalent of a $1,000 par value bond paying annual interest of 10%
The holder of a convertible bond can convert an interest payment received into a cash dividend on common stock if the dividend is greater than the interest payment
The contractual interest rate is always equal to the market interest rate on the date that bonds are issued
Discount on bonds in an additional cost of borrowing and should be recorded as interest expense over the life of the bonds
If a corporation issued bonds at an amount less than face value, it indicates that the corporation has a weak credit rating
A corporation that issues bonds at a discount will recognize interest expense at a rate which is greater than the market interest rate
If bonds are issued at a discount, the issuing corporation will pay a principal amount less than the face amount of the bonds on the maturity date
If bonds are issued at a premium, the carrying value of the bonds will be greater than the face value of the bonds for all periods prior to the bond maturity date
If the market interest rate is greater than the contractual interest rate, bonds will sell at a discount
Each payment on a mortgage note payable consists of interest on the original balance of the loan and a reduction of the loan principal
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