Chapter 12 Flashcards
Account that is directly related to another account. Have the same normal balance of related account and are added together on balance sheet
Adjunct Account
Details each loan payment’s allocation between principal and interest and the beginning and ending loan balances
Amortization Schedule
Stream of equal cash payments made at equal time intervals
Annuity
Long-term debt issued to multiple lenders
Bond Payable
Issuer may call and pay off specified price whenever issuer wants
Callable Bonds
Bond Payable - Discount account current balance or + premium account current balance
Carrying Amount of Bonds
Interest calculated on the principal and on all previously earned interest
Compound Interest
Unsecured bonds backed only by the goodwill of the bond issuer
Debentures
Measures the proportion of total liabilities to total equity
Debt to Equity Ratio
Occurs when a bond’s issue price is less than face value
Discount on Bonds Payable
Allocates an amount of bond discount or premium, based in the market interest rate at issuance, to each interest period over the life of the bond
Effective-Interest Amortization Method
Amount a borrower must payback to the bondholders on the maturity date
Face Value
Occurs when a company earns more income on borrowed money than the related interest expense
Leverage
Interest rate the investors demand in order to loan their money
Market Interest Rate
Long-term debt that is backed with a security interest in specific property
Mortgage Payable
Occurs when a bond’s issue price is more than face value
Premium on Bonds Payable
Amount a person would invest now to receive a greater amount in the future
Present Value
Bonds that give the bondholders the right to take specified assets of the issuer if the issuer fails to pay principal or interest
Secured Bonds
Bonds that mature in installments at regular intervals
Serial Bonds
Interest calculated only on the principal amount
Simple Interest
Interest rate that determines that the amount of cash interest the borrower pays and the investor receives each year
Stated Interest Rate
Allocates an equal amount of bond discount or premium to each interest period over the life of the bond
Straight-Line Amortization
Bonds that all mature at the same time
Term Bonds
Recognition that money earns income over time
Time Value of Money
