chapter 15 study Flashcards
obligations expected to be paid after one year
long term liabilities
bonds
long-term notes
lease obligations
long term liabilities
advantages of bonds over common stock
stockholder control is not affected
tax savings
earnigns per share of common stock may be higher
secured bonds
specific assets of the issuer pledged as collateral for the bonds
bond secured by real estate
mortgage bond
bonds issued aainst the creditor
unsecured or debenture bonds
bonds that mature at a single specified future date
term bonds
bonds that mature in installments
serial bonds
bonds issued int he name fo the owner
registered bondds
bearer of coupon bonds are not registered t/f
true
bondholders must send in coupons to receive interest payments t/f
true
bonds that permit bondholders to convert the bonds into common stock at their option
convertible bonds
bonds not registered, must sen din coupons to receive interest payments
bearer or coupon bonds
state laws grant corporations the power to issue bonds
within the coproation
board of directors stipulate bonds to be authorized
terms are set forth in bond indenture
formal legal document of bond terms
bond indenture
issuance of bonds at face value
db cash
cr bonds payable
market rate of interest is higher than stated rate
discount rate
market rate of interest is lower than stated value
premium rate
when bonds are issued at discount
db discount on bonds payable
deducted from bonds payable on balance sheet
when bonds are issued at premium
cr premium on bonds payable
added to bonds payable in balance sheet
installmment payments of mortage
db interest expense
db mortgage notes payable
cr cash
transfers all benefits and risks of wonership from lessor to lessee
capital risk
measures percentage of total assets provided by creditors
debt to total assets ratio
debt to total assets ratio
total debt / total assets
times interest earned ratio
income before expense / income taxes by interest expense
effective interest method
bond interest expense coputed first ( face value x stated rate)
cr cash or bonds interest payable (face value x stated rate)
bond discount or premium is then determined
straight line method
amortizationf allocates the same amoutn of bond discount or premium each interest period
straight line method formula
bond discount (Premium)/ number of interest periods = bond discount(premium) amortization
recording of bond discount amortization
db bond interest expense
cr discount on bonds payable
recording of bond premium amortization
cr bond interest expense
db premium on bonds payable
