Chapter 22 - Long-term Bonds Flashcards
FINANCING THROUGH BONDS
mortgage loan
- a long term debt created when a note is given as part of the purchase price for land of buildings
FINANCING THROUGH BONDS
bonds payable
- long term debt instruments that are written promises to repay the principal at a future date; interest is due at a fixed rate payable over the life of the bond
FINANCING THROUGH BONDS
secured bonds
- bonds for which property is pledged to secure the claims of bond holders
FINANCING THROUGH BONDS
collateral trust bonds
- bonds secured by the pledge of securities, such as stocks or bonds of other companies
FINANCING THROUGH BONDS
bond indenture
- a bond contract
FINANCING THROUGH BONDS
debenture
- unsecured bonds backed only by a corporation’s general credit
FINANCING THROUGH BONDS
registered bonds
- bonds issued to a party whose name is listed in the corporations records
FINANCING THROUGH BONDS
coupon bonds
- unregistered bonds that have coupons attached for each interest payment; also called bearer bonds
FINANCING THROUGH BONDS
serial bonds
- bonds issued at one time but payable over a period of years
FINANCING THROUGH BONDS
convertible bonds
- bonds that give the owner the right to convert the bonds into common stock under specified conditions
FINANCING THROUGH BONDS
callable bonds
- bonds that allow the issuing corporation to require the holder to surrender the bonds for payment before their maturity date
FINANCING THROUGH BONDS
call price
- the amount the corporation must pay for the bond when it is called
FINANCING THROUGH BONDS
market interest rate
- the interest rate a corporation is willing to pay and investors are willing to accept at the current time
FINANCING THROUGH BONDS
face interest rate
- the contractual interest specified on the bond
FINANCING THROUGH BONDS
trading on the equity, or leveraging
- using borrowed funds to earn a profit greater than the interest that must be paid on the borrowing
BOND ISSUE AND INTEREST
premium on bonds payable
- the excess of the price paid over the face value of a bond
BOND ISSUE AND INTEREST
straight-line amortization
- amortizing the premium or discount on bonds payable in equal amounts over the life of the bond
BOND ISSUE AND INTEREST
discount on bonds payable
- the excess of the face value over the price received by the corporation for a bond
BOND ISSUE AND INTEREST
carrying value of bonds
- the balance of the Bonds Payable account plus the Premium on Bonds Payable account minus the Discount on Bonds Payable account; also called book value of bonds
BOND ISSUE AND INTEREST
bond issue costs
- costs incurred in issuing bonds, such as legal and accounting fees and printing costs
BOND RETIREMENT
bond retirement
- when a bond is paid and the liability is removed from the company’s balance sheet
BOND RETIREMENT
bond sinking fund investment
- a fund established to accumulate assets to pay off bonds when they mature
