Test 3 Flashcards
Bearer Bonds
Bonds made payable to whoever holds them (the bearer); also called unregistered bonds
Bond indenture
Contract between the bond issuer and the bondholders; identifies the parties’ rights and obligations
Capital Leases
Long-term leases in which the lessor transfers substantially all risk and rewards of ownership to the lessee
Discount on bond payable
Difference between the bond’s par value and its lower issue price or carrying value; occurs when the contract rate is less than the market rate
Fair Value Option
Amount a company would receive if it settle a liability (or sold an asset) in an orderly transaction as of the balance sheet date
Market Rate
Interest rate that borrowers are willing to pay and lenders are willing to accept for a specific lending agreement at a given level of risk
Off Balance Sheet Financing
Acquisition of assets by agreeing to liabilities not reported on the balance sheet
Registered Bonds
Bonds owned by investors whose name and addresses are recored by the issuer; interest payments are made to the registered owners
Serial Bonds
Bonds consisting of separate amounts that mature at different dates
Term Bonds
Scheduled to mature on a specific date
Operating Leases
Short-term leases for which the lessor retains risk and rewards of ownership
Comprehensive Income
Net change in equity for a period, excluding owner investment and distributions
Equity Method
Accounting method used for long-term investments when the investor has significant influence. Earnings of investee are reported (% of ownership) in the LT Investments account as gains and losses. Cash dividends reduce the balance in the equity account (LT investments) to reflect a return of capital.
Significant Influence
Ownership of 20% to 50% of a company is generally considered significant. The investor can influence the company management decisions.
Multinational
Company that operates in several countries
