14.1

Choose the statement that best describes the type of financial instruments that are commonly issued in today's markets.

"Exotic" financial instruments continue to be developed and offered to investors.

The requirements of a future payment of a specific or estimated amount of cash, at a specific or projected date are characteristics of debt. Identify another common characteristic.

Periodic interest is incurred

Neumann Company issues 20-year bonds. Related to these bonds, Neumann is obligated to

repay a certain amount at a specific date.

Which of the following represent the typical characteristics of liabilities? (Select all that apply.)

The requirement of future cash payments. Future cash payments are certain or estimable. Interest accrues as time passes on long-term liabilities.

Which of the following represent the typical characteristics of liabilities? (Select all that apply.) Multiple select question.

The requirement of future cash payments. Interest accrues as time passes on long-term liabilities. Future cash payments are certain or estimable.

Which of the following is an advantage of issuing bonds?

The total loan is broken into many parts, making it easier to find lenders.

Which of the following are correct regarding bonds? (Select all that apply.)

They obligate the issuing company to pay a specific amount. They obligate the issuing company to repay the bonds at a specific date.

Adams Corporation's balance sheet reports $100 million in bonds payable. Felix Company who purchased some of Adams' bonds will report the bonds as

an investment.

The mirror image of a liability is an asset. The mirror image of investments in bonds is .

bonds payable

One of the advantages associated with bonds is that a relatively large amount of debt can be

broken into small portions.

Periodic interest expense on liabilities is calculated by multiplying the amount of debt outstanding during the period by the

effective interest rate

Which of the following are terms that can be used to refer to the periodic interest rate paid by bond issuers? (Select all that apply.) Multiple select question.

nominal rate coupon rate stated rate

Periodic interest expense on liabilities is calculated by multiplying the effective interest rate by the amount of debt

outstanding during the interest period.

The periodic interest paid by the issuer of a bond is referred to as the

stated rate.