Principles of Accounting

What is the term for the dollar value of long-term assets per each dollar of long-term debt?

• Fixed interest rate

• Long-term liabilities

• Amortization

• Line of credit

Which type of interest rate remains constant over the life of the loan?

• Variable interest rate

• Fixed interest rate

• Stated interest rate

• Secured interest rate

What is the process of systematic and periodic allocation of the costs of intangible assets to expense over their useful lives?

• Amortization

• Bond issuance

• Installment notes

• Line of credit

What is a pre-approved financing arrangement with a lending institution called?

• Bond certificate

• Line of credit

• Installment note

• Mortgage bond

What is the term for bonds secured by specific identifiable assets?

• Unsecured bonds

• Debenture

• Secured bonds

• Variable bonds

What are subordinated debentures?

• Unsecured bonds with a higher claim on assets than general creditors

• Unsecured bonds with a lower claim on assets than general creditors

• Secured bonds with a lower claim on assets than general creditors

• Secured bonds with a higher claim on assets than general creditors

What is a sinking fund?

• A fund used to pay dividends to shareholders

• A fund to which the bond issuer contributes cash annually to ensure sufficient funds to pay the face amount on the maturity date

• A fund used to pay off short-term liabilities

• A fund used to invest in new projects

What is the difference between the call price and the face amount of the bond called?

• Bond discount

• Bond premium

• Call premium

• Face value

What is the effective interest rate?

• The rate at which a bond is sold

• The yield rate of bonds, equal to the market rate of interest on the day the bonds are sold

• The rate at which dividends are paid

• The rate at which a bond matures

What is straight-line amortization?

• A method of amortization where the account balance is reduced in varying amounts

• A method of amortization in which equal amounts of the account being reduced are transferred to the appropriate expense account over the relevant time period

• A method of amortization where the account balance is reduced in increasing amounts

• A method of amortization where the account balance is reduced in decreasing amounts