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ACCT2211 > Ch 15 Non-Current Liabilities > Flashcards

Ch 15 Non-Current Liabilities Flashcards

1
Q

amortized cost

A

The face value (principal amount) of the bonds less any unamortized discount or plus any unamortized premium. (p. 787)

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2
Q

amortizing the discount

A

The allocation of the bond discount to interest expense over the life of the bonds. (p. 789)

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3
Q

amortizing the premium

A

The allocation of the bond premium to interest expense over the life of the bonds. (p. 793)

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4
Q

bond

A

A debt security that is traded on an organized securities exchange, is issued to investors, and has these properties:

  • the principal amount will be repaid at a designated maturity date and
  • periodic interest is paid (normally semi-annually) at a specified rate on the principal amount. (p. 778)
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5
Q

bond certificate

A

A legal document indicating the name of the issuer, the face value of the bond, and other data such as the contractual interest rate and maturity date of the bond. (p. 780)

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6
Q

callable bonds

A

Bonds that the issuing company can redeem (buy back) at a stated dollar amount prior to maturity. (p. 780)

aka redeemable bonds

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7
Q

capital lease

A

A lease that transfers substantially all the benefits and risks of ownership to the lessee, so that the lease effectively results in purchase of the asset under ASPE. (p. 804)

Referred to a finance lease under IFRS.

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8
Q

collateral

A

Assets pledged as security on a loan. (p. 779)

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9
Q

contractual interest rate

A

The rate that determines the amount of interest the borrower pays and the investor receives. (p. 780)

Aka coupon interest rate & stated interest rate

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10
Q

convertible bonds

A

Bonds that can be converted into common shares that the bondholder’s option. (p. 780)

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11
Q

coupon interest rate

A

The rate the determines the amount of interest the borrower pays and the investor receives. (p. 780)

Aka contractual interest rate & stated interest rate

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12
Q

debentures

A

Bonds issued against the general credit of the borrower. (p. 780)

Aka unsecured bonds

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13
Q

debt to total assets

A

The ratio of total liabilities to total assets. Indicates the proportion of assets that is financed by debt. (p. 807)

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14
Q

discount (on bonds payable)

A

The difference that results when bonds’ selling price is less than their face value. This occurs when the market interest rate is greater than the contractual interest rate. (p. 785)

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15
Q

EBIT

A

earnings before interest and tax, calculated as:

profit + interest expense + income tax expense. (p. 807)

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16
Q

effective-interest method of amortization

A

A method of calculating interest expense and of amortizing a bond discount or bond premium that results in periodic interest expense equal to a constant percentage of the amortized cost of the bonds. (p. 787)

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17
Q

face value

A

The amount of principal that the issuer must pay at the bond’s maturity date. (p. 780)

Aka maturity value & par value

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18
Q

finance lease

A

A lease that transfers all the benefits and risks of ownership to the lessee so that the lease effectively results in a purchase of the asset under IFRS. (p. 804)

Aka capital lease under ASPE

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19
Q

financial leverage

A

Borrowing at one rate and investing at a different rate. (p. 779)

20
Q

fixed interest rate

A

An interest rate that is constant (unchanged) over the term of the debt. (p. 799)

21
Q

floating (or variable) interest rate

A

An interest rate that changes over the term of the debt with fluctuating market rates. (p. 799)

22
Q

future value

A

An amount that will be paid in the future. In the case of bonds payable, it is the face amount of the bonds. (p. 785)

23
Q

instalment note

A

Normally a long0term note that is payable in a series of periodic payments. (p. 799)

24
Q

instalments

A

A series of periodic payments made to repay a note payable. (p. 799)

25
Q

interest coverage ratio

A

A measure of a company’s ability to meet its interest obligations. It is calculated by dividing profit (earnings) before interest expense and income ta expense (EBIT) by interest expense. (p. 807)

26
Q

lease

A

A contractual arrangement between two parties where the party that owns an asset agrees to allow another party to use the specified property for a series of cash payments over an agreed period of time. (p. 803)

27
Q

lessee

A

The renter of a property. (p. 803)

28
Q

lessor

A

The owner of an asset for rent. (p. 803)

29
Q

market (effective) interest rate

A

The rate that investors require for lending money to a company. (p. 781)

30
Q

market value (of the bond)

A

The price that the bond trades at. (p. 781)

31
Q

maturity date

A

The date on which the final payment on a debt security is due to be repaid by the issuer to the investor. (p. 780)

32
Q

maturity value

A

The amount of principal that the issuer must pay at the bond’s maturity date. (p. 780)

Aka face value & par value

33
Q

mortgage bond

A

A secured bond where real estate is provided as collateral. (p. 779)

34
Q

mortgage note payable

A

An instalment note payable that pledges title to specific assets as security for a loan. (p. 799)

35
Q

non-current liability

A

Obligation that is expected to be paid after one year or longer. (p. 778)

36
Q

off-balance sheet financing

A

The intentional effort by a company to structure its financing arrangements to avoid showing liabilities on its books. (p. 804)

37
Q

operating lease

A

A lease where the benefits and risks of ownership are not transferred to the lessee. (p. 803)

38
Q

par value

A

The amount of principal that the issuer must pay at a bond’s maturity date. (p. 780)

Aka face value & maturity value

39
Q

premium (on bonds payable)

A

The difference that results when bonds’ selling price is greater than their face value. This occurs when the market interest rate is less than the contractual interest rate. (p. 785)

40
Q

present value

A

The amount that must be invested today at a specified interest rate to have a certain amount in the future. (p. 782)

41
Q

redeemable bonds

A

Bonds that the issuer can retire at a stated dollar amount before maturity. (p. 780)

Aka callable bonds

42
Q

redemption price

A

An amount that a company pays to buy back bonds that is specified at the time the bonds are issued. (p. 798)

43
Q

secured bonds

A

Bonds with specific assets pledged as collateral by the bond issuer. (p. 779)

44
Q

sinking fund bonds

A

Bonds secured by specific assets set aside to redeem (retire) the bonds. (p. 779)

45
Q

stated interest rate

A

The rate that determines the amount of interest the borrower pays and the investor receives. (p. 780)

Aka contractual interest rate & coupon interest rate

46
Q

unsecured bonds

A

Bonds issued against the general credit of the borrower. (p. 780)

Aka debentures

ACCT2211 (15 decks)

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