ACCT 201 Principles of Financial Accounting
Practice Exam - Chapter 10
Reporting & Analyzing Long-Term Liabilities
Dr. Fred Barbee

Solution to Short-Problem #1

Short Problem #1

Match each of the following terms a through j with the appropriate definitions 1 through 10:

  1. Bond
  2. Callable bonds
  3. Annuity
  4. Contract rate
  5. Sinking fund bonds
  6. Secured bonds
  7. Carrying value
  8. Premium on bonds
  9. Bond indenture
  10. Pledged assets to secured liabilities

1.
(f)
 Bonds that have specific assets of the issuer pledged as collateral.
2.
(c)
 A series of equal payments at equal intervals.
3.
(h)
 The difference between the par value of a bond and its higher issue price or carrying value.
4.
(b)
 Bonds that give the issuer an option of retiring them at a stated amount prior to maturity.
5.
(d)
 The interest rate specified in the bond indenture.
6.
(i)
 The contract between the bond issuer and the bondholder(s); it identifies the rights and obligations of the parties.
7.
(e)
 Bonds that require the issuer to make deposits to a separate account; the bondholders are repaid at maturity from this account.
8.
(g)
 The net amount at which bonds are reported on the balance sheet.
9.
(j)
 The ratio of the book value of a company's pledged assets to the book value of its secured liabilities.
10.
(a)
 A written promise to pay an amount identified as the par value of the bond along with interest at a stated rate.