Accounting Bonds Work

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Pablo Guere
Chpt 14 acct241
Q 1,3,4,13,19,21,22
E 14-1, 14-4, 14-5, 14-10
P 4-6 (may1 to jan1 only)

1. (a) From what sources might a corporation obtain funds through long-term debt? (b) What is a bond indenture? What does it contain? (c) What is a mortgage? A) Bonds payable, long-term notes payable, mortgages payable, pension liabilities, and lease liabilities are examples of long- term liabilities.

B) It is an agreement that often includes the amounts authorized to be issued, interest rate, due date, call provisions, property pledged as security, sinking fund requirements, working capital and dividend restrictions, and limitations concerning the assumption of additional debt.
C) a document that pledges title to property as security for the loan. Individuals, proprietorships, and partnerships use mortgage notes payable more frequently than do corporations.

2. Distinguish between the following interest rates for bonds payable: (a)  Yield rate- The rate of interest actually earned by the bondholders (b)  Nominal rate-
(c)  Stated rate.
(d) Market rate.
(e) Effective rate

4. Distinguish between the following values relative to bonds payable: 1. (a)  Maturity value.
(b)  Face value.
(c) Market (fair) value.
(d) Par value.

13. How are gains and losses from extinguishment of a debt classified in the income statement? What disclosures are required of such transactions?

19. What is the fair value option? Briefly describe the controversy of applying the fair value option to financial liabilities.

21. What disclosures are required relative to long-term debt and sinking fund requirements?

22.What is off-balance-sheet financing? Why might a company be interested in using off-balance- sheet financing?
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