Exam 11: Notes, Bonds, and Leases

On the date of initial issuance of a financial instrument , the market value will equal

The capital lease method classifies all of the lease payment each period as an operating use of cash on the statement of cash flows.

The amount borrowed initially and the market value of a note or bond at any date subsequent to the initial borrowing equals the present value of the future, or remaining, cash flows discounted at an appropriate interest rate.

Operating leases are economically similar to purchasing assets with funds obtained from issuing long-term bonds and result in similar accounting.

Both the lease asset and the lease liability appear on the lessee's balance sheet under the capital lease method, whereas neither appears on the lessee's balance sheet under the operating lease method.

Which of the following is/are not true?

Historical market interest rate is the discount rate prevailing at the date of the initial borrowing.

Investors in bonds sometimes hold a _____ option, meaning they can force the issuing company to repay the bonds prior to maturity under specified contractual conditions.

When the stated interest rate for a loan equals the yield required by the lender, then the amount borrowed equals the

Firms typically borrow from banks, insurance companies, and other financial institutions by signing a note, which specifies the terms of the borrowing arrangement.The initial valuation of the loan equals _____.

A firm that does not account for long-term notes and bonds using the fair value option, uses the _____ to account for the loan while it is outstanding.

Some bonds are _____, which means the issuing firm has the right to repurchase the bonds prior to maturity at a specified price.

In historical cost accounting, the discounting process uses the original interest rate appropriate for the particular borrower at the time it incurred the obligation.That rate will have depended on the amount and terms of the borrowing arrangement as well as the risk that the borrower will default on the obligations.The rate is known as the

When the coupon rate equals the historical market interest rate or initial yield to maturity, then the initial issue price equals the face value of the bonds.

Which of the following is/are true?

Bonds whose indentures contain a provision which requires the issuing firm to make a provision for partial early retirement of the bond issue include serial bonds and _____ bonds.

_____ often advise corporate borrowers on the sorts of financial instruments the lending market appears to prefer at the time the firm wants to borrow.

The internal rate of return, often called yield to maturity, is the discount rate that equates the future cash flows to the market value at any date.

U.S.GAAP specifies criteria for a capital lease.Which of the following is not one of the criteria?

U.S.GAAP requires that all long-term monetary liabilities appear on the balance sheet at the