Upgrade to remove ads
Ch. 10 Terms
Terms in this set (28)
To be classified as a current liability, how or when must a debt be expected to be paid?
Either out of existing current assets or by crediting other current liabilities.
In what denomination are bonds typically issued?
when a bond is sold at a premium, at what value is it reported on the balance sheet?
face value plus any premium.
how is the market value of a bond issuance determined?
By adding the present value of the principal amount to the present value of the interest payments.
what is the effect of amortizing a bond discount?
it increases the carrying value of the bonds.
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 government entities.
bonds that the issuing company can redeem (buy back) at a stated dollar amount prior to maturity.
Bonds that can be converted into common stock at the bondholders option.
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.
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.
bonds that have specific assets of the issuer pledged as collateral.
Bonds issued against the general credit of the borrower.
amount of principal due at the maturity date of the bond.
the value today of an amount to be received at some date in the future after taking into account current interest rates.
the date on which the final payment on a bond is due from the bond issuer to the investor.
times interest earned
a measure of a company's solvency, calculated by dividing income before interest expense and taxes by interest expense.
Time Value of money
the relationship between time and money. a dollar received today is worth more than a dollar promised at some time in the future.
Types of Current Liabilities
notes payable, accounts payable, unearned revenue, and accrued liabilities such as taxes, salaries and wages, and interest.
Contractual interest rate
the rate used to determine the amount of cash interest the borrower pays and the investor receives.
When the contractual interest rate and the market interest rate are the same
Bonds sell at face value
market interest rate
the rate investors demand for loaning funds
In the market rate is lower than the contractual interest rate
investors will have to pay more than face value for the bonds.
Amortization of the discount
INCREASES the amount of interest expense reported each period.
Amortization of the premium
DECREASES the amount of interest expense reported each period.
When bonds are redeemed before maturity
1) Eliminate the carrying value of the bonds at the redemption date, 2) record the cash paid, 3) recognize gain/loss on redemtion
measure the ability of a company to survive over a long period of time.
a long-term note secured by a document that pledges title to specific assets as security for a loan.
THIS SET IS OFTEN IN FOLDERS WITH...
Ch. 1 Terms Accounting
Ch. 2 Questions
Ch. 4 Terms
Ch. 5 Terms
YOU MIGHT ALSO LIKE...
Long-Term Liabilities: Bonds
acct207 chapter 10
Chapter 14: Financing Liabilities
OTHER SETS BY THIS CREATOR
CST 111: Week 2
PSYC 3131 Ch. 1 Terms
Ch. 6 Terms
OTHER QUIZLET SETS
ACCT 210-01Exam 4 Chapter 10 Terms
ch 7 tax
Investments Test 3
Financial Management Final (7,8,9)