chapter 15 study

Question 1

obligations expected to be paid after one year

Answer 1

long term liabilities

Question 2

bonds
long-term notes
lease obligations

Answer 2

long term liabilities

Question 3

advantages of bonds over common stock

Answer 3

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

Question 4

secured bonds

Answer 4

specific assets of the issuer pledged as collateral for the bonds

Question 5

bond secured by real estate

Answer 5

mortgage bond

Question 6

bonds issued aainst the creditor

Answer 6

unsecured or debenture bonds

Question 7

bonds that mature at a single specified future date

Answer 7

term bonds

Question 8

bonds that mature in installments

Answer 8

serial bonds

Question 9

bonds issued int he name fo the owner

Answer 9

registered bondds

Question 10

bearer of coupon bonds are not registered t/f

Answer 10

true

Question 11

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

Answer 11

true

Question 12

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

Answer 12

convertible bonds

Question 13

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

Answer 13

bearer or coupon bonds

Question 14

state laws grant corporations the power to issue bonds

Answer 14

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

Question 15

formal legal document of bond terms

Answer 15

bond indenture

Question 16

issuance of bonds at face value

Answer 16

db cash

cr bonds payable

Question 17

market rate of interest is higher than stated rate

Answer 17

discount rate

Question 18

market rate of interest is lower than stated value

Answer 18

premium rate

Question 19

when bonds are issued at discount

Answer 19

db discount on bonds payable

deducted from bonds payable on balance sheet

Question 20

when bonds are issued at premium

Answer 20

cr premium on bonds payable

added to bonds payable in balance sheet

Question 21

installmment payments of mortage

Answer 21

db interest expense
db mortgage notes payable
cr cash

Question 22

transfers all benefits and risks of wonership from lessor to lessee

Answer 22

capital risk

Question 23

measures percentage of total assets provided by creditors

Answer 23

debt to total assets ratio

Question 24

debt to total assets ratio

Answer 24

total debt / total assets

Question 25

times interest earned ratio

Answer 25

income before expense / income taxes by interest expense

Question 26

effective interest method

Answer 26

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

Question 27

straight line method

Answer 27

amortizationf allocates the same amoutn of bond discount or premium each interest period

Question 28

straight line method formula

Answer 28

bond discount (Premium)/ number of interest periods = bond discount(premium) amortization

Question 29

recording of bond discount amortization

Answer 29

db bond interest expense

cr discount on bonds payable

Question 30

recording of bond premium amortization

Answer 30

cr bond interest expense

db premium on bonds payable