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jeremy harmon > Chapter 8 Financial Accounting > Flashcards

Chapter 8 Financial Accounting Flashcards

1
Q

What are 2 other names for principal (In Bond Terms)

A

Face Value

Par Value

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2
Q

What lease would we want and why?

A

Operational lease because we do not have to share a lot of information from an accounting standpoint

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3
Q

Issuing Bonds at a Premium

A

If stated interest rate of bonds is greater that market interest rate, bondholders will pay MORE than face value for bond

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4
Q

Unsecured (debenture) Bonds

A

Backed only by the good faith of the issuing company

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5
Q

Interest Expense on Bonds Issued at a Premium

A

The company pays interest based on only the face value even though it received more than face value

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6
Q

Lease

A

Rental agreement in which tenant agrees to make rent payments to the property owner

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7
Q

Unearned Revenues

A

Customers makes payments before receiving product or service

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8
Q

Current Liabilities

A

Obligations due with one year of balance sheet date

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9
Q

What are 4 types of bonds?

A

Term Bonds
Serial Bonds
Secured (mortgage) bonds
Unsecured (debenture) bonds

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10
Q

What does Carrying Amount =

A

Face Value

Less Discount Balance

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11
Q

Lessor

A

The person who owns the property

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12
Q

Interest (In Bond Terms)

A

Company must pay bondholders interest in regular intervals over the term of the bond

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13
Q

What 3 things does the Stated Interest Rate include?

A

Printed on the bond certificate
Determines amount of cash interest
Remains Constant

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14
Q

What are 3 characteristics of Operating Lease?

A

Usually short term or cancelable
Lessor retains risk and rewards of owning asset
Lessee records rent expense when payments are made

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15
Q

Estimated Warranty Payable

A

Companies guarantee products through warranty agreements

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16
Q

Market Interest Rate

A

Rate investors demand for loaning money which changes frequently

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17
Q

Time Value of Money

A

When money has more value if you hold it in your hand rather than the future

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18
Q

Interest Expense on Bonds Issued at a Discount

A

The company must pay interest based on the face value even though it received less than face value

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19
Q

Term Bonds

A

All bonds in an issue mature at one specific date

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20
Q

When accounting for Contingent Liabilities, the chances of future events being assessed as UNLIKELY what happens to the accounting?

A

Do not report

21
Q

Bonds Payable

A

Groups of notes payable issued to multiple lenders called bondholders

22
Q

Short Term Notes Payable

A

Common form of financing where company incurs interest expense

23
Q

When a company raises money by issuing bonds or notes what 3 things happen?

A

Does not dilute control of company
Results in higher earnings per share
More debt increases risk

24
Q

What are the 2 categories of Leases

A

Operating

Capital

25
Q

Principal (In Bond Terms)

A

Amount borrowed and usually in $1000 units

26
Q

Sales Tax Payable

A

Tax levied by state on retail sales which company collects from customer and pays to government

27
Q

Convertible Bonds

A

Bondholders may exchange bonds for companies stock

28
Q

In order to raise capital, what do companies do?

A

Sell bonds to public

29
Q

Warranty Expense

A

Estimated in same period as sale of product and follows the matching principle

30
Q

When accounting for Contingent Liabilities, the chances of future events being assessed as probable what happens to the accounting?

A

Record liability if amount can be estimated

31
Q

If a company needs funds, what 2 ways can they raise money?

A

Issuing Stock

Issuing Bonds or Notes

32
Q

Accounts Payable

A

Amount owed for products and services purchased on account

33
Q

Contingent Liabilities

A

Potential liability that depends on a future event arising out of past events

34
Q

When a company raises money by issuing stock what 3 things happen?

A

No liabilities or interest expense
Less risky
More Costly

35
Q

Serial Bonds

A

Bonds in the issue mature installments

36
Q

Underwriter (In Bond Terms)

A

A securities firm that purchases the bond issue and resells to clients

37
Q

Secured (mortgage) Bonds

A

Bondholders have right to company assets if interest and principal is not paid

38
Q

Issuing Bonds at a Discount

A

If stated interest rate of bonds is less than market interest rate, bondholders will not pay face value for bond

39
Q

What are 2 differences between Bond Premium and Bond Discount?

A

Bond Premium

  • issued price above face value
  • stated rate of interest is greater than market rate of interest

Bond Discount

  • Issue price below face value
  • stated rate of interest is less than market rate of interest
40
Q

What is an example of a Long Term Liability?

A

Bonds

41
Q

What are the 2 current liabilities that are estimated or amount is unknown?

A

Estimated Warranty Payable

Contingent Liabilities

42
Q

What is attractive to investors in terms of convertible bonds?

A

Investors like lower interest rates

43
Q

What is are 2 examples of an operating lease?

A

A college student signing a lease for an apartment

- An airline renting a plane

44
Q

When accounting for Contingent Liabilities, the chances of future events being assessed as REASONABLY probable what happens to the accounting?

A

Include in notes to financial statements

45
Q

Payroll Liabilities

A

Salaries and wages paid to employees which includes income taxes

46
Q

Accrued Liabilities

A

Expense incurred but not yet paid, which is often an adjusting entry that includes salaries and interest payable

47
Q

What are 6 Current Liabilities of Known Account?

A 
Accounts Payable 
Short Term Notes Payable
Sales Tax Payable
Accrued Liabilities
Payroll Liabilities 
Unearned Revenues
48
Q

Lessee

A

The person who takes out the lease

49
Q

Maturity Date

A

Date bond is due, which is mainly due in terms of 5, 10 or 20 years

jeremy harmon (108 decks)

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