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16 Cards in this Set

  • Front
  • Back
A bond indenture is
the covenants and other terms of the agreement between the issuer of bonds and the lender
The interest rate written in the terms of the bond indenture is known as the
coupon rate, nominal rate, or stated rate
When bonds are issued at a premium the nominal rate of interest ________ the market rate
exceeds
Under the effective interest method of bond discount or premium amortization, the periodic interest expense is equal to the
*****the market rate multiplied by the beginning of period carrying amount of the bonds*****
If bonds are issued between interest dates, the entry on the books of the issuing corporation could include a_______ because the issuer is then liable for the full term payment to the holder
credit to interest expense or interest payable,
Theoretically, the costs of issuing bonds could be expensed when
incurred, reported as a reduction of the bond liability or debited to a deferred charge account and amortized over the life of the bonds
The printing costs and legal fees associated with the issuance of bonds should be accumulated
in a deferred charge account and amortized over the life of the bonds
Treasury bonds should be shown on the balance sheet as a
deduction from bonds payable
An early extinguishment of bonds payable, which were originally issued at a premium, is made by purchase of the bonds between interest dates, at the time of reacquisition any costs of issuing the bonds must be
amortized up to the purchase date, the premium must be amortized up to the purchase date and interest must be accrued from the last interest date to the purchase date
The generally accepted method of accounting for gains or losses from the early extinguishment of debt treats any gain or loss as
a difference between the requisition price and the net carrying amount of the debt which should be recognized in the period of redemption
When a NP is issued for property, goods or services, the PV of the note is measured by
the fair value of the property, goods, or services, the market value of the note, or using an imputed interest rate to discount all future payments on the note
20 When a note payable is exchanged for property, goods, or services, the stated interest rate is presumed to be fair unless no interest rate is stated, the stated interest rate is unreasonable, the stated face amount of the note is materially different from the current cash sales price for similar items or from current market value of the note
When a note payable is exchanged for property, goods, or services, the stated interest rate is presumed to be fair unless
no interest rate is stated, the stated interest rate is unreasonable, the stated face amount of the note is materially different from the current cash sales price for similar items or from current market value of the note
Forms of off balance sheet financing may include
non-consolidated subsidiaries, special purpose entities, or operating leases
Companies must disclose future payments for sinking fund requirements and maturity amounts of long term debt
during each of the next five years
The times interest earned ratio is computed by
dividing income before income taxes and interest expense by interest expense
The debt to total assets ratio
is computed by dividing total debt/total assets