Chapter 9 : Accounting
A discount is issued when..
market rate > Stated Rate
Debt to equity ratio
= Total Liabilities / Total Stockholders Equity The lower the better
Convertible
Bonds are retired when the bondholder exchanges them for the issuing company's stock
greater than the market interest rate
Bonds will be issued at a premium if the stated interest rate is
Characteristics of an Annuity
(1)A series of amounts that are equal (2)Equal time periods between payment dates
Identify two ratios commonly used to assess a company's financial risk.
(1)Debt to equity ratio (2) Times interest earned ratio
A premium is issued when
Market Rate < Stated Rate
Serial Bonds
Mature in installments
Term Bonds
Mature on a specific Date Payment of the full principal amount of the bond at the end of the loan term
Semiannually
Most corporate bonds pay interest
Characteristics of Bonds
Secured Unsecured Convertible Callable
Secured Bonds
Supported by a specific assets the issuer pledges as collateral
Callable Bonds are redeemable by
The Bond issuer
Face Amount, Discount, And Premium
The carrying value at maturity is equal to the face amount of bonds issued at:
Bond
A formal debt instrument that obligates the borrower to repay a stated amount (referred to as the principal or face amount) at a specified maturity date can be a note or a(n)
Covertable Bonds
Allow the lender to convert each bond into common stock
Times Interest Earned Formula
Earnings before interest an taxes / Interest Expense
A single large Investor
In a private placement of bonds, bonds may be sold to
Long-Term Debt
In order to assess a company's financial risk, investors and creditors frequently consider and analyze the company's:
Contra-Liability
The discount on Bonds Payable account is classified as a
Default Risk
The possibility that a company will be unable to pay its bonds payable and the related interest when due is commonly referred to as:
Stated Rate
The rate of interest that is used to compute the cash interest paid to bondholders
Installment Notes
Loans requiring periodic payments of interest and principle are referred to as
Market interest rates decreased
A common reason for redeeming a bond prior to its maturity date is that
