ACC 2 Accounting For Bonds Chapter 12

A long-term promise to pay a specified amount on a specified date and to pay interest as stated intervals is called:

• stock

• capital stock

• bond

• notes payable

What is NOT one of the three sources that a growing business needs to expand?

• using retained earnings

• issuing additional capital stock

• borrowing the funds

• finding investors through the stock market

An advantage of issuing stock is that

• the additional capital becomes part of a corporation's permanent capital

• the additional capital becomes part of a corporation's temporary capital

• there is not advantage of issuing stock

• it will turn into a bond over time

Who must decide whether to raise the needed capital?

• CEO of firm

• CFO of firm

• Board of Direction

• Board of Directors

Large loans are difficult to obtain for short periods.

• True

• False

Bonds are similar to notes payable because

• they both deal with investments

• they both are written promises to pay

• they both are a liability to a firm

• they both make money in the long run

Bonds generally run for

• for one year or less

• for a long period of time

Notes payable generally run for

• for one year or less

• for a long period of time

Capital Stock has the nature of periodic payments of dividends. Bonds have the nation of periodic payments of..

• interest expense

• interest payment

• notes payable

• investments

The amount to be paid to a bondholder at the bond maturity date is called the

• face value

• stated value

• interest rate

• bond issue