Intermediate Accounting Ch 14

Front 1

A bond indenture is

Back 1

the covenants and other terms of the agreement between the issuer of bonds and the lender

Front 2

The interest rate written in the terms of the bond indenture is known as the

Back 2

coupon rate, nominal rate, or stated rate

Front 3

When bonds are issued at a premium the nominal rate of interest ________ the market rate

Back 3

exceeds

Front 4

Under the effective interest method of bond discount or premium amortization, the periodic interest expense is equal to the

Back 4

*****the market rate multiplied by the beginning of period carrying amount of the bonds*****

Front 5

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

Back 5

credit to interest expense or interest payable,

Front 6

Theoretically, the costs of issuing bonds could be expensed when

Back 6

incurred, reported as a reduction of the bond liability or debited to a deferred charge account and amortized over the life of the bonds

Front 7

The printing costs and legal fees associated with the issuance of bonds should be accumulated

Back 7

in a deferred charge account and amortized over the life of the bonds

Front 8

Treasury bonds should be shown on the balance sheet as a

Back 8

deduction from bonds payable

Front 9

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

Back 9

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

Front 10

The generally accepted method of accounting for gains or losses from the early extinguishment of debt treats any gain or loss as

Back 10

a difference between the requisition price and the net carrying amount of the debt which should be recognized in the period of redemption

Front 11

When a NP is issued for property, goods or services, the PV of the note is measured by

Back 11

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

Front 12

When a note payable is exchanged for property, goods, or services, the stated interest rate is presumed to be fair unless

Back 12

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

Front 13

Forms of off balance sheet financing may include

Back 13

non-consolidated subsidiaries, special purpose entities, or operating leases

Front 14

Companies must disclose future payments for sinking fund requirements and maturity amounts of long term debt

Back 14

during each of the next five years

Front 15

The times interest earned ratio is computed by

Back 15

dividing income before income taxes and interest expense by interest expense

Front 16

The debt to total assets ratio

Back 16

is computed by dividing total debt/total assets