Flash Cards Chapter 14

“Recognition of an impairment loss and the recognition of a gain on the extinguishment of debt are separate events, and each event should be recognized in the period in which it occurs. The Board believes that the recognition of an impairment loss should be based on the measurement of the asset at its fair value and that the existence of nonrecourse debt should not influence that measurement.” (Statement 144, paragraph B34)

The holder of bonds becomes a creditor to the company and is entitled to a first claim on the earnings of the company.

Typically these types of bonds are voted for (approved) and paid back by the local community (known as voted indebtedness); payments are collected with

What is the present value of $7,540 to be received at the end of each of 18 periods, discounted at 5% compound interest?

(TCO A) On July 1, 2010, an interest payment date, $60,000 of Parks Co. bonds were converted into 1,200 shares of Parks Co. common stock, each having a par value of $45 and a market value of $54. There is $2,400 unamortized discount on the bonds. Using the book value method, Parks would record

| Debt securities sold to investors that must be repaid at a particular date some years in the future are called

Consequently, the shift in business strategy required the purchase of storage facilities and equipment to transport documents to and from said facilities (Bruns, 2010). Therefore, to finance the new business direction the company issued $10 million in 20-year term bonds in 1999. Said bonds were issued at a coupon rate of 8% and sold at a 9% market rate. Additionally, the organization was advised in 2008 that said bonds could be redeemed early and reissued at lower interest rates; saving the organization substantial costs in interest payments. As such, company president David Lyons instructed employee Rene Cook to research said opportunity and provide information regarding the effect of early redemption of said bonds.

* Bad debt expense (Unfavorable) – direct write-off method for tax purposes, allowance method for book purposes

Coupon Bond - Coupon bonds are unregistered and coupons are attached to the bond and the single interested has to be payee by the payable, also the coupon is been submitted semi annually. Coupon bonds are also known as bearer bonds (Adair, T.A. Jr., Cornett, M.M., Nofsinger, J., 2015).

Short-term debt securities are accounted for as trading or AFS consistent with our policies for those investments. Short-term loans are carried at amortized cost. Fair values are determined consistent with policies described in Note 5 – Fair Value for the respective investment type.

At the time of an initiation of the financial asset, the expected credit loss is recognized for a 12-month period. This is the amount of expected losses that may be incurred as a result of adverse events in respect of financial instruments and that are likely to occur within the 12 months after the balance sheet date. This amount is equal to the probability-weighted loss from the likelihood of occurrence of the corresponding event. In this case, interest income is calculated from the total amount of current value (gross-carrying amount), that is, without reducing it by the amount of the recognized loss.

The entity that issues the bond is known as the Issuer and when you purchase one,

Marketable Treasury securities are not redeemable before maturity unless, by the terms of their issue, they are callable. If called, they stop earning interest on the date called. Investors are informed at the time of purchase if their securities are subject to call.

Ford has issued bonds, which are a written promise to repay a specific amount of money at a specified date in the future. In 2013, Ford sold $2 billion in 4.75% 30-year bonds to fund its worldwide pension plans, which were facing a serious shortfall.

Thus a bond is a form of loan or IOU: the holder of the bond is the lender (creditor), the issuer of the bond is the borrower (debtor), and the coupon is the interest. Bonds provide the