Bonds Debt Restructure Flashcards

1
Q

Any bond that matures in installments

A

Bonds & Debt Restructuring

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2
Q

Any bond that matures on a single date

A

Bonds & Debt Restructuring

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3
Q

A bond not secured by any collateral

A

Bonds & Debt Restructuring

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4
Q

Cash is held in a sinking fund for repayment of bond at maturity

5 years of requirements and maturity details should be disclosed

A

Bonds & Debt Restructuring

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5
Q

Present Value of the principal payment at maturity+ Present Value of Interest Payments made
: Market Value of Bond Proceeds

A

Bonds & Debt Restructuring

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6
Q

Step 1: PV of $1 @ Yield Rate (not Stated Rate)
x Bond Face Value

PLUS

Step 2: PV of an Ordinary Annuity of $1 for Term @Yield
x (Stated Rate x Face)

A

Bonds & Debt Restructuring

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7
Q

Include Engraving; Printing; Legal; Underwriter; Registration

Debited to a deferred charge account and amortized over life of Bond using S/L

Bond Proceeds - Bond Issuance Costs : Net Bond Proceeds

Time of amortization begins when issued

A

Bonds & Debt Restructuring

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8
Q

Reported at FMV with unreleased gains and losses being included in earnings

A

Bonds & Debt Restructuring

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9
Q

Both discount and premium amortization amounts increase each year

A

Bonds & Debt Restructuring

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10
Q

No gain or loss recognized

APIC is the plug for the difference between the Bond’s Book Value and the Par Value of the Common Stock

A

Bonds & Debt Restructuring

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11
Q

Rate on the face of the bond

A

Bonds & Debt Restructuring

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12
Q

Rate that bonds are currently selling for

A

Bonds & Debt Restructuring

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13
Q

Bond will need to sell at a discount in order for buyers to be interested. The difference in market rate vs. the stated is made up by the buyer purchasing the bond for less than par value

A

Bonds & Debt Restructuring

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14
Q

Bond will need to sell at a premium in order for buyers to be interested. The difference in market rate vs. the stated is made up by the buyer purchasing the bond for more than par value

A

Bonds & Debt Restructuring

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15
Q

The total cash that seller receives will be MORE than they normally would (set aside any considerations for premium or discount; they are irrelevant for this point).

Basically; the purchaser of the bonds must give the bond issuer the amount of accrued interest up front.

A

Bonds & Debt Restructuring

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16
Q

When the bonds are issued

A

Bonds & Debt Restructuring

17
Q

Cash for payment : Stated rate x Face amount

A

Bonds & Debt Restructuring

18
Q

Interest expense : effective yield x carrying value

Any difference between expense and cash payment is applied as amortization against premium/discount

A

Bonds & Debt Restructuring

19
Q

Bonds that can be converted to stock

Book value method used if no gain or loss

Market value method used if there is a gain or loss

A

Bonds & Debt Restructuring

20
Q

Gain or Loss is Ordinary

Extraordinary if both unusual and infrequent

A

Bonds & Debt Restructuring

21
Q

If terms are modified; and future payments are now less than the carrying amount of the debt; then a Gain is recognized

A

Bonds & Debt Restructuring

22
Q

Gain recognized:

Difference between cash paid and carrying amount of debt

Difference between non-cash asset given and re-valued at FMV and debt carrying amount

A

Bonds & Debt Restructuring

23
Q

If future cash flows discounted at loan’s Effective Interest Rate are less than Carrying Value:

Effective Rate calculated using original rate; not modified rate

A

Bonds & Debt Restructuring