7/12/14 328 Chapter 14 Flashcards - ProProfs

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328 Chapter 14

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1 liabilities probable future sacrifices of economic benefitsarising from present obligations of aparticular...

2 indenture agreement incorporates the terms of the issue

and restrictions

3 bond indeture

promise by the borrowwer to the lender to paya sum of money at the date, and periodic

interest...

4 covenants and restrictions protect both lenders and borrowers

5 discount (issue price) stated rate < effective rate (facevalue)

6 premium stated/issue price > effective rate/ face value

7 effective interest method allocates the discount or premium in increasingamounts over the bond term

8 straight-line method allocates the same amount of discount orpremium to each interest period

9 discount contra liability

10 premium adjucnt account

11 interest rate and bond price inversely related

12 deferred charge bond issuing cost

13 transaction costs directly reduce the carrying value of the debt

14 fair value and book value same only when issued

present value of its expected future cash flows

7/12/14 328 Chapter 14 Flashcards - ProProfs

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15 interest and principal consists of

16 stated also known as the coupon or nominal rate

17 effective rate also known as the effective yield or market

rate

18 increases amortization of a discount __________interest expense

19 decreases amortization of a premium __________

interest expense

20 effective interest method matches expenses with revenues better

21 liability account discount and premium is what type of account

22 zero interest bearing note present value measured by the cash received

23 zero interest bearing note amount of the discount represents the expensethat will incur on the note over the life of...

24 mortgage note payable

a promissory note secured by a document

called a mortgage that pledges title to propertyas...

25 mortgage note no premium or discount involved

26 fair value reflects the current cash equivalent value of

financial instruments

27 unrealized holding gain or loss net change in the fair value of the liability from

one period to another

28 fair value bonds and notes recorded at

29 off balance sheet financing an attempt to borrow monies in such a way toprevent recording the obligations

30 non consolidated subsidiary

subsidiary company that is less than 50%

owned, therefore does not report the assetsand liabilities...

31 special purpose entity (SPE) to perform a special project

32 operating leases instead of owning the assets companies leasethem

33 troubled debt restructuring when a creditor for economic or legal reasons

related to the debtor's financial difficulties...

34settlement of debt < carrying value(BV) ORmod terms

troubled debt restructuring transactions

35 settlement of debt (record at Fair value) transfer of non cash assets or issuance ofdebtors stock

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