Ch. 14 Bond Terminology Flashcards Preview

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Flashcards in Ch. 14 Bond Terminology Deck (25)
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1
Q

probable future sacrifices of economic benefit arising from present obligations that are no payable within a year or operating cycle of the company

A

Long-term Liabilities

2
Q

Bonds issues that mature on a single date

A

Term Bond

3
Q

issues that mature in installments, frequently used by school districts and other local taxing bodies that receive money through special levy

A

Serial Bonds

4
Q

issues that give the issuer the right to call and redeem the bonds prior to maturity

A

Callable Bonds

5
Q

bonds that can be converted into other securities of the corporation for a specified time after being issued

A

Convertible Bonds

6
Q

bonds issued that are redeemable in measures of a commodity

A

Commodity-backed Bonds (asset-linked bonds)

7
Q

bonds sold at a discount that provides the buyer’s total interest payoff at maturity

A

Deep-discount bonds or zero interest debenture bonds

8
Q

bonds issued in the name of the owner, require surrender of the cerificate and issuance of a new certificate to complete a sale.

A

Registered Bonds

9
Q

bond not recorded in the name of the owner and may be transferred from one owner to another by mere delivery.

A

Bearer Bond (coupon bond)

10
Q

issues that pay no interest unless the issuing company is profitable

A

Income bonds

11
Q

issues that the interest on them is paid form specified revenue sources, are most frequently issued by airports and governmental bodies.

A

Revenue bonds

12
Q

How are bonds valued?

A

the present value of future cash flows; 1) PV of interest and 2) PV of principle

13
Q

the interest rate written in the terms of the bond indenture is

A

the stated, coupon, or nominal rate.

14
Q

if the bonds sell for less than face value they sell at

A

discount

15
Q

if the bonds sell for more than face value they sell at

A

premium

16
Q

the rate of interest actually earned by the bondholders

A

effective yield or market rate

17
Q

amortization method at a constant amount each interest period

A

straight-line method

18
Q

Amortization of a discount

A

increases interest expense

19
Q

Amortization of a premium

A

decreases interest expense

20
Q

If market interest rate is higher than the nominal interest rate, the bonds will sell at a

A

discount

21
Q

if the market interest rate is lower than the nominal interest rate, the bonds will sell at a

A

premium

22
Q

bonds issued at par on the interest date, when they are issued

A

accrue no interest, and the journal entry is a debit to cash and a credit to bonds payable

23
Q

effective interest method

A

step 1: compute bond interest by multiplying the carrying value at the beginning of the period by the effective interest expense
step 2: determine bond discount or premium amortization by comparing interest expense with interest (cash) to be paid

24
Q

carrying value

A

is the same as book value

25
Q

the replacement of an existing issuance with a new one is called

A

refunding