chapter 15 study Flashcards

1
Q

obligations expected to be paid after one year

A

long term liabilities

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2
Q

bonds
long-term notes
lease obligations

A

long term liabilities

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3
Q

advantages of bonds over common stock

A

stockholder control is not affected
tax savings
earnigns per share of common stock may be higher

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4
Q

secured bonds

A

specific assets of the issuer pledged as collateral for the bonds

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5
Q

bond secured by real estate

A

mortgage bond

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6
Q

bonds issued aainst the creditor

A

unsecured or debenture bonds

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7
Q

bonds that mature at a single specified future date

A

term bonds

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8
Q

bonds that mature in installments

A

serial bonds

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9
Q

bonds issued int he name fo the owner

A

registered bondds

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10
Q

bearer of coupon bonds are not registered t/f

A

true

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11
Q

bondholders must send in coupons to receive interest payments t/f

A

true

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12
Q

bonds that permit bondholders to convert the bonds into common stock at their option

A

convertible bonds

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13
Q

bonds not registered, must sen din coupons to receive interest payments

A

bearer or coupon bonds

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14
Q

state laws grant corporations the power to issue bonds

A

within the coproation
board of directors stipulate bonds to be authorized
terms are set forth in bond indenture

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15
Q

formal legal document of bond terms

A

bond indenture

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16
Q

issuance of bonds at face value

A

db cash

cr bonds payable

17
Q

market rate of interest is higher than stated rate

A

discount rate

18
Q

market rate of interest is lower than stated value

A

premium rate

19
Q

when bonds are issued at discount

A

db discount on bonds payable

deducted from bonds payable on balance sheet

20
Q

when bonds are issued at premium

A

cr premium on bonds payable

added to bonds payable in balance sheet

21
Q

installmment payments of mortage

A

db interest expense
db mortgage notes payable
cr cash

22
Q

transfers all benefits and risks of wonership from lessor to lessee

A

capital risk

23
Q

measures percentage of total assets provided by creditors

A

debt to total assets ratio

24
Q

debt to total assets ratio

A

total debt / total assets

25
times interest earned ratio
income before expense / income taxes by interest expense
26
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
27
straight line method
amortizationf allocates the same amoutn of bond discount or premium each interest period
28
straight line method formula
bond discount (Premium)/ number of interest periods = bond discount(premium) amortization
29
recording of bond discount amortization
db bond interest expense | cr discount on bonds payable
30
recording of bond premium amortization
cr bond interest expense | db premium on bonds payable