Chapter 8 Financial Accounting Flashcards

(49 cards)

1
Q

What are 2 other names for principal (In Bond Terms)

A

Face Value

Par Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What lease would we want and why?

A

Operational lease because we do not have to share a lot of information from an accounting standpoint

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Issuing Bonds at a Premium

A

If stated interest rate of bonds is greater that market interest rate, bondholders will pay MORE than face value for bond

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Unsecured (debenture) Bonds

A

Backed only by the good faith of the issuing company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Interest Expense on Bonds Issued at a Premium

A

The company pays interest based on only the face value even though it received more than face value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Lease

A

Rental agreement in which tenant agrees to make rent payments to the property owner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Unearned Revenues

A

Customers makes payments before receiving product or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Current Liabilities

A

Obligations due with one year of balance sheet date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are 4 types of bonds?

A

Term Bonds
Serial Bonds
Secured (mortgage) bonds
Unsecured (debenture) bonds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What does Carrying Amount =

A

Face Value

Less Discount Balance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Lessor

A

The person who owns the property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Interest (In Bond Terms)

A

Company must pay bondholders interest in regular intervals over the term of the bond

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What 3 things does the Stated Interest Rate include?

A

Printed on the bond certificate
Determines amount of cash interest
Remains Constant

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are 3 characteristics of Operating Lease?

A

Usually short term or cancelable
Lessor retains risk and rewards of owning asset
Lessee records rent expense when payments are made

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Estimated Warranty Payable

A

Companies guarantee products through warranty agreements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Market Interest Rate

A

Rate investors demand for loaning money which changes frequently

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Time Value of Money

A

When money has more value if you hold it in your hand rather than the future

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Interest Expense on Bonds Issued at a Discount

A

The company must pay interest based on the face value even though it received less than face value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Term Bonds

A

All bonds in an issue mature at one specific date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

When accounting for Contingent Liabilities, the chances of future events being assessed as UNLIKELY what happens to the accounting?

A

Do not report

21
Q

Bonds Payable

A

Groups of notes payable issued to multiple lenders called bondholders

22
Q

Short Term Notes Payable

A

Common form of financing where company incurs interest expense

23
Q

When a company raises money by issuing bonds or notes what 3 things happen?

A

Does not dilute control of company
Results in higher earnings per share
More debt increases risk

24
Q

What are the 2 categories of Leases

A

Operating

Capital

25
Principal (In Bond Terms)
Amount borrowed and usually in $1000 units
26
Sales Tax Payable
Tax levied by state on retail sales which company collects from customer and pays to government
27
Convertible Bonds
Bondholders may exchange bonds for companies stock
28
In order to raise capital, what do companies do?
Sell bonds to public
29
Warranty Expense
Estimated in same period as sale of product and follows the matching principle
30
When accounting for Contingent Liabilities, the chances of future events being assessed as probable what happens to the accounting?
Record liability if amount can be estimated
31
If a company needs funds, what 2 ways can they raise money?
Issuing Stock | Issuing Bonds or Notes
32
Accounts Payable
Amount owed for products and services purchased on account
33
Contingent Liabilities
Potential liability that depends on a future event arising out of past events
34
When a company raises money by issuing stock what 3 things happen?
No liabilities or interest expense Less risky More Costly
35
Serial Bonds
Bonds in the issue mature installments
36
Underwriter (In Bond Terms)
A securities firm that purchases the bond issue and resells to clients
37
Secured (mortgage) Bonds
Bondholders have right to company assets if interest and principal is not paid
38
Issuing Bonds at a Discount
If stated interest rate of bonds is less than market interest rate, bondholders will not pay face value for bond
39
What are 2 differences between Bond Premium and Bond Discount?
Bond Premium - issued price above face value - stated rate of interest is greater than market rate of interest Bond Discount - Issue price below face value - stated rate of interest is less than market rate of interest
40
What is an example of a Long Term Liability?
Bonds
41
What are the 2 current liabilities that are estimated or amount is unknown?
Estimated Warranty Payable | Contingent Liabilities
42
What is attractive to investors in terms of convertible bonds?
Investors like lower interest rates
43
What is are 2 examples of an operating lease?
A college student signing a lease for an apartment | - An airline renting a plane
44
When accounting for Contingent Liabilities, the chances of future events being assessed as REASONABLY probable what happens to the accounting?
Include in notes to financial statements
45
Payroll Liabilities
Salaries and wages paid to employees which includes income taxes
46
Accrued Liabilities
Expense incurred but not yet paid, which is often an adjusting entry that includes salaries and interest payable
47
What are 6 Current Liabilities of Known Account?
``` Accounts Payable Short Term Notes Payable Sales Tax Payable Accrued Liabilities Payroll Liabilities Unearned Revenues ```
48
Lessee
The person who takes out the lease
49
Maturity Date
Date bond is due, which is mainly due in terms of 5, 10 or 20 years