Accounting Chapter 10
Terms
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Bond Certificate
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the bond document that each bondholder receives
- Bond Discount
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the difference between the selling price and par when the bond is sold for less than par
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Bond Premium
- the difference between the selling price and par when the bond is sold for more than par
- Bond Principal
- the amount (a) payable at the maturity of the bond and (b) on which the periodic cash interest payments are computed
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Callable Bonds
- may be called for early retirement at the option of the issuer
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Convertible Bonds
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may be converted to other securities of the issuer (usually common stock)
- Coupon Rate
- the stated rate of interest on bonds
- Debenture
- an unsecured bond; no assets are specifically pledged to guarantee repayment
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Debt-to-equity ratio =
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= Total Liabilities / Owners' Equity
Measures the balance between debt and equity. Debt funds are viewed as being riskier than equity funds.
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Effective-Interest Method
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amortizes a bond discount or premium on the basis of the effective-interest rate; it is the theoretically preferred method.
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Face Amount
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another name for principal, or the maturity value of the bond
- Indenture
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a bond contract that specifies the legal provisions of a bond issue
- Maket Interest Rate; Yield; Effective-Interest Rate
- the current rate of interest on a debt when incurred
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Par Value
- another name for bond principa, or the maturity value of a bond
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Stated Rate
- the rate of cash interest per period stated in the bond contract
- Straight-Line Amortization
- is a bond discount or premium is a simplified method that allocates an equal dollar amount to each interest period
- Trustee
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an independent party appointed to represent the bondholders