bonds quiz 1 Flashcards
A bond is a form of an interest-bearing note. Like a note, a bond requires periodic interest payments with the _______ to be repaid at the _________.
face amount
maturity date
The underlying contract between the company issuing bonds and the bondholders is called a ___________ or _________
bond indenture or trust indenture
The face amount of each bond is called the ______. This is the amount that must be repaid on the dates the bonds mature.
principal
The interest on bonds may be payable …
annually, semiannually, or quarterly
When all bonds of an issue mature at the SAME time, they are called ____bonds.
If the bonds mature over SEVERAL dates, they are called _____ bonds
term
serial
Bonds that may be exchanged for other securities, such as common stock, are called ______bonds.
convertible
When a corporation issues bonds, the proceeds received for the bonds depend on: (3)
- The face amount of the bonds
- The interest rate on the bonds.
- The market rate of interest for similar bonds.
The interest rate to be paid on the face amount of the bond is called the __________ OR _________
contract rate or coupon rate.
Market Rate > Contract Rate
Face amount > selling price
Discount
Market Rate < contract Rate
Face amount < selling price
Premium
market rate =the contract rate, bonds will sell at the ________
face amount
When bonds are issued at less or more than their face amount, the discount or premium must be amortized over ….
the life of the bonds.
The difference between the face amount and the selling price of the bonds is the ________
bond discount.
The account, Discount on Bonds Payable, is a contra account to _________ and has a normal ______ balance.
Bonds Payable
debit
