Chapter 14-15 Vocab

Question 1

Bearer Bond

Answer 1

A bond that is payable to the bearer or person who has physical possession of the bond

Question 2

Bond

Answer 2

A long-term debt instrument issued by corporations to raise money from the public

Question 3

Bond Certificate

Answer 3

The note given to bondholders

Question 4

Bond indenture

Answer 4

The bond contract

Question 5

Bond issue

Answer 5

A group of bonds

Question 6

Callable bond

Answer 6

A bond that gives the company issuing the bond the right to buy it back before the maturity date at a specified price

Question 7

Capital Lease

Answer 7

A lease in which a company acquires such a substantial interest in the leased property that, for all practical purposes, the lease company owns the asset

Question 8

Carrying value of debt

Answer 8

Remaining liability on the pro forma balance sheet

Question 9

Collateral

Answer 9

An asset of group of assets specifically named in a debt agreement to which the creditor has claim if the borrower fails to comply with the terms of the note.

Question 10

Convertible bond

Answer 10

A bond feature that allows bondholders to exchange the bonds for common of preferred stock

Question 11

Covenants

Answer 11

Restrictions that lenders place on the borrowing company to protect the lenders’ interest

Question 12

Debenture bonds

Answer 12

Unsecured bonds; bonds with no specific assets pledged as collateral

Question 13

Discount on a note

Answer 13

The excess of the face value of a note over its present value (cash proceeds)

Question 14

Face rate on the note

Answer 14

Used to determine the cash interest the borrower pays

Question 15

Holder of the note

Answer 15

The lender

Question 16

Lease

Answer 16

An agreement to convey the use of a tangible asset from one party to another in return for rental payments

Question 17

Lump-sum payment note

Answer 17

A debt instrument that contains a promise to pay a specific amount of money at the end of a specified period of time

Question 18

Marker of the note

Answer 18

The borrower

Question 19

Marker, or effective, interest rate

Answer 19

The actual interest rate changed on a note’s proceeds

Question 20

Mortgage

Answer 20

A long-term note secured with real estate, such as land or buildings, as collateral

Question 21

Mortgage bond

Answer 21

A bond that is secured with real estate

Question 22

Operating lease

Answer 22

A rental agreement for a period of time substantially shorter than the economic life of the leased asset

Question 23

Periodic payment and lump-sum note

Answer 23

A debt instrument that combines periodic payments and a final lump-sum payment.

Question 24

Periodic payment note

Answer 24

A debt instrument that contains a promise to make a series of equal payments consisting of both interest and principal at equal time intervals over a specified time period

Question 25

Premium on a note

Answer 25

The amount that the present value (cash proceeds) of a note exceed its face value

Question 26

Proceeds of the note

Answer 26

The amount of cash raised from issuance of a note

Question 27

Registered bonds

Answer 27

Bonds that are numbered and made payable in the name of the bondholder

Question 28

Secured bond

Answer 28

A bond that has some part of the issuing corporation’s assets serving as security for the loan.

Question 29

Serial bond

Answer 29

A bond issue hat has specified portions of the bond issue coming due periodically over the life of the bond issue

Question 30

Subordinated bonds

Answer 30

Unsecured bonds whose rights to repayment are ranked after, or subordinated to, some other person or group of creditors

Question 31

Unsecured bond

Answer 31

A bond that does not have any specific assets pledged as security against it's repayment

Question 32

Adjunct Account

Answer 32

An account that is added to another account balance to reveal its carrying value

Question 33

Discount on Bonds Payable

Answer 33

A contra liability account that represents the difference between the face value and the carrying value of the bonds

Question 34

Discount on Notes Payable

Answer 34

A contra liability account that represents the difference between the carrying value and the fae value if the note; exists when the face value is greater than the carrying value

Question 35

Paid-in Capital from Treasury Stock

Answer 35

An account used to show the amount of additional capital generated from the reissue of treasury stock

Question 36

Paid-in Capital in Excess of Par Value

Answer 36

An account used to reflect the difference between the net assets received and the par value of the stock issued

Question 37

Premium on Bond Payable

Answer 37

An account that represents the difference between the face value and the carrying value of the bonds; exists when the face value is less than the carrying value

Question 38

Stock Dividends Distributable

Answer 38

An account credited on the date of declaration of a stock dividend to show the par value of the shares the corporation will issue on the date of distribution

Question 39

Face value of the note

Answer 39

The amount the borrower will repay the lender for principal