5110 Accounting questions and answers with grade A+ and real and accurate solutions

long-term liabilities - ANSconsist of probable future sacrifices of economic benefits arising from present obligations that are not payable within a year or the operating cycle of the company, whichever is longer. examples of long term liabilities - ANSBonds payable Notes payable Mortgages payable Deferred taxes Certain contingencies Pension liabilities Lease liabilities Reasons for Issuance of Long term liabilities - ANS1. debt financing = only available source of funds 2. debt financing may have a lower cost 3. income tax advantage 4. voting privilege not shared 5. opportunity for leverage. bond - ANSa type of note in which a company agrees to pay the holder the face value at the maturity date and usually pays interest periodically at a specified rate on the face value. bond certificate - ANSa legal document that specifies details about a bond bond indenture - ANSa document (contract) that defines the rights of the bondholders. face (par) value - ANSthe amount the issuer agrees to pay at maturity stated, face, nominal, coupon, or contract rate - ANSthe rate at which the issuer of the bond agrees to pay interest each period until maturity. Interest payments usually made semiannually. yield (effective rate) - ANSthe market rate at which the bonds are actually sold A bond is valued at: - ANSthe present value of its expected future cash flows 1. interest 2. principal