Clemson ACCT 2010 -Chapters 10-13 Review Questions and Correct Answers

Accrued Liabilities liabilities for expenses that have been incurred but not paid at the end of the accounting period Amortization Schedule a table showing the gradual reduction in a balance over its life; in the context of loans and notes, an amortization schedule shows the payment of interest and repayment of principal balances owed. Contingent Liabilities potential liabilities that have arisen as a result of a past transaction or event; their ultimate outcome will not be known until a future event occurs or fails to occur Debit-to-Assets Ratio financial measure of a company's level of risk, calculated as total debt divided by total assets Discount the amount by which a bond's issue price is less than its face value Effective-Interest Method of Amortization allocates the amount of bond premium or discount over each period of a bond's life in amounts corresponding to the bond's carrying value and market interest rate. Face Value the payment made when the bond matures; used to compute interest payments. Issue Price the amount of money that a lender pays (and the company receives) when a bond is issued. Market Interest Rate the rate investors demand for loaning funds to the corporation (i.e. yield, discount rate, or effective interest rate). Maturity Date the date on which an investment becomes due for payment in full. Premium the amount by which a bond's issue price exceeds its face value. Present Value the current value of an amount to be received in the future; a future amount discounted for compound interest.