ACCT 3230 - Chapter 14 - LearnSmart

A common reason for redeeming a bond prior to its maturity date is that

market interest rates decreased

Bonds that are backed by a lien on specific real estate owned by the issuer are referred to as ____________ bonds.

mortgage

Which of the following transactions will increase a company's working capital?

Receipt of cash on a long-term note

The most common type of corporate debt is

bonds

Which of the following are classified as current liabilities?

Current portion of long-term debt. Long-term loans with violated debt covenants. Debt callable in the upcoming year, even when not expected to be called.

Which of the following is correct regarding the effective interest method?

Interest expense is equal to the effective interest rate multiplied by the outstanding balance of the debt

Which of the following is true regarding a debenture bond?

It is secured by the faith and credit of the issuer

Which of the following are terms that can be used to refer to the periodic interest rate paid by bond issuers?

Nominal rate; Stated rate; Coupon rate

Registered bonds vs Bearer bonds

Registered: present day ; Bearer bonds: years ago

Which of the following are correct regarding bonds?

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

The feature that distinguishes loss contingencies from other liability is the

Uncertainty that a loss will occur.

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

broken into small portions

The specific promises made to bondholders are described in a document called a bond

indenture

Today, most bonds issued are

registered bonds

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

stated rate

Convertible bonds are retired when bondholders choose to convert them into shares of

stock

Bonds that can be bought back by the issuer at a specified price prior to the bonds' maturity date are referred to as ______________ bonds.

callable

Bonds that permit bond holders to exchange their bonds for common stock are referred to as ___________ bonds.

convertible

A bond that is secured only by the faith and credit of the issuing corporation is referred to as an

indenture bond