Chapter 9

Question 1

A form of debt that is expected to be paid within the longer of one year of the balance sheet date or one operating cycle. Examples include accounts payable, wages or salaries payable, unearned revenues, short-term notes payable, and the current portion of long-term debt.

Answer 1

CURRENT OR SHORT-TERM LIABILITIES

Question 2

Forms of debt expected to be paid beyond one year of the balance sheet date or the next operating cycle, whichever is longer. Mortgages, long-term bank loans, and bonds payable are examples

Answer 2

LONG-TERM LIABILITIES

Question 3

Liabilities where the payee, amount, and timing of payment are known. Examples include accounts payable, unearned revenues, and payroll liabilities.

Answer 3

KNOWN CURRENT LIABILITIES

Question 4

The goods or services on which GST applies.

Answer 4

TAXABLE SUPPLIES

Question 5

Sellers of taxable supplies

Answer 5

REGISTRANTS

Question 6

The federal government body to which all taxes, including federal income tax, are remitted.

Answer 6

RECEIVER GENERAL FOR CANADA

Question 7

Provincial sales tax paid by the final consumers of products.

Answer 7

PROVINCIAL SALES TAX

Question 8

A combination of GST and PST that is used in some Canadian jurisdictions

Answer 8

HARMONIZED SALES TAX

Question 9

A liability known to exist where the amount, although uncertain, can be estimated. Two common examples are warranties and income taxes.

Answer 9

ESTIMATED LIABILITY

Question 10

An obligation incurred by the seller of a product or service to replace or repair defects

Answer 10

WARRANTY

Question 11

A type of liability that exists when one of the following two criteria are satisfied: it is not probable, or it cannot be reliably estimated.
Is not recorded, rather it is disclosed in the notes to the financial statements except when there is a remote likelihood of its existence.

Answer 11

CONTINGENT LIABILITY

Question 12

A debt instrument, generally issued to many investors, that requires future repayment of the original amount at a fixed date, as well as periodic interest payments during the intervening period.

Answer 12

BOND

Question 13

A contract that is prepared between the corporation and the future bondholders. It specifies the terms with which the corporation will comply, such as how much interest will be paid and when.

Answer 13

BOND INDENTURE

Question 14

A person appointed to be an intermediary between the corporation and the bondholder and administers the terms of the indenture.

Answer 14

TRUSTEE

Question 15

Bonds are backed by physical assets of the corporation. These are usually long-lived assets.

Answer 15

SECURED BONDS

Question 16

Bonds backed by real property that is legally pledged as security for the bonds,

Answer 16

MORTGAGE BONDS

Question 17

A formal document stating that a company is liable to pay a specified amount with interest. The debt is not backed by any collateral. These bonds usually command a higher interest rate because of the added risk for investors.

Answer 17

DEBENTURES

Question 18

Bonds that require the name and address of the owner to be recorded by the corporation or its trustee.

Answer 18

REGISTERED BONDS

Question 19

Bonds that pass on the delivery of the bonds to new owners and is not tracked. Payment of interest is made when the bearer clips coupons attached to the bond and presents these for payment

Answer 19

BEARER BONDS

Question 20

Bonds that have differing maturity dates, as indicated on the bond contract. Investors are able to choose bonds with a term that agrees with their investment plans.

Answer 20

SERIAL BONDS

Question 21

The issue of bonds that permits the issuing corporation to redeem, or call, the bonds before their maturity date. The bond indenture usually indicates the price at which bonds are callable. Corporate bond issuers are thereby protected in the event that market interest rates decline below the bond contract interest rate. The higher interest rate bonds can be called to be replaced by bonds bearing a lower interest rate.

Answer 21

CALL PROVISION

Question 22

Bonds that allow the bondholder to exchange bonds for a specified type and amount of the corporation’s share capital.

Answer 22

CONVERTIBLE BONDS