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Match the Items Below by Entering the Appropriate Code Letter

Question 139

Matching

Match the items below by entering the appropriate code letter in the space provided.

Premises:

Responses:

Bonds that can be retired by the company before they mature

Interest Coverage

A debt security that is traded on organized exchanges

Financial Leverage

Unsecured bonds issued against the general credit of the borrower

Term bonds

Fixed debt payments resulting in an increasingly larger portion of each payment being credited toward principal and a smaller portion toward interest over time.

Effective-interest method of amortization

Occurs when the contractual rate of interest is greater than the market rate of interest.

Finance lease

Indicates the company's ability to meet interest payments as they come due.

Blended Payments

Used to determine the amount of interest the borrower pays and the investor receives.

Premium on bonds payable

Borrowing at one rate and investing at a different rate.

Redeemable bonds

Occurs when the contractual rate of interest is less than the market rate of interest.

Debenture bonds

Produces a periodic interest expense equal to a constant percentage of the amortized cost of the bonds.

Bonds

Bonds that mature at a single specified future date

Contractual rate

A contractual arrangement that transfers the risks and rewards of ownership to the lessee.

Discount on bonds payable

Premises:

Bonds that can be retired by the company before they mature

A debt security that is traded on organized exchanges

Unsecured bonds issued against the general credit of the borrower

Fixed debt payments resulting in an increasingly larger portion of each payment being credited toward principal and a smaller portion toward interest over time.

Occurs when the contractual rate of interest is greater than the market rate of interest.

Indicates the company's ability to meet interest payments as they come due.

Used to determine the amount of interest the borrower pays and the investor receives.

Borrowing at one rate and investing at a different rate.

Occurs when the contractual rate of interest is less than the market rate of interest.

Produces a periodic interest expense equal to a constant percentage of the amortized cost of the bonds.

Bonds that mature at a single specified future date

A contractual arrangement that transfers the risks and rewards of ownership to the lessee.

Responses:

Interest Coverage

Financial Leverage

Term bonds

Effective-interest method of amortization

Finance lease

Blended Payments

Premium on bonds payable

Redeemable bonds

Debenture bonds

Bonds

Contractual rate

Discount on bonds payable

Correct Answer:

Premises:

Responses:

Bonds that can be retired by the company before they mature

A debt security that is traded on organized exchanges

Unsecured bonds issued against the general credit of the borrower

Fixed debt payments resulting in an increasingly larger portion of each payment being credited toward principal and a smaller portion toward interest over time.

Occurs when the contractual rate of interest is greater than the market rate of interest.

Indicates the company's ability to meet interest payments as they come due.

Used to determine the amount of interest the borrower pays and the investor receives.

Borrowing at one rate and investing at a different rate.

Occurs when the contractual rate of interest is less than the market rate of interest.

Produces a periodic interest expense equal to a constant percentage of the amortized cost of the bonds.

Bonds that mature at a single specified future date

A contractual arrangement that transfers the risks and rewards of ownership to the lessee.