MUHASEBE II - Deneme Sınavı - 15

In order to finance and expand their operations companies need funds. Although some of the necessary funding can be provided by their own operations, companies usually have to raise some of the funds from external sources. Therefore, these companies are required to obtain longterm financing from banks and other financial institutions and we call this process as “external financing”. The correct answer is E.

In a balance sheet, obligations related with external financing sources named as “liabilities”. Liabilities are first classified as “Current (ShortTerm) Liabilities” and “Non-Current (LongTerm) Liabilities” based on the time period in which expected debt will be paid back. Short term liabilities consist of an expected outflow of resources arising from present obligations that are payable within a year or the operating cycle of the company whichever is longer. Whereas long term liabilities consist of an expected outflow of resources arising from present obligations that are not payable within a year or the operating cycle of the company whichever is longer. The correct answer is D.

Long term liabilities consist of an expected outflow of resources arising from present obligations that are not payable within a year or the operating cycle of
the company whichever is longer.

Face value is also called as the par value, principal amount or maturity value of the bonds.

A secured bond is a bond for which a company has pledged specific property to ensure its payment.

When all bonds of an issue mature at the same time, they are called term bonds.

If the bonds mature over several dates, they are called serial bonds.

Bonds issued in the name of the owner are called “registered bonds” and require surrender of the certificate and issuance of a new certificate to complete a sale.

Bonds which pay interest from specified revenue sources are called “revenue bonds”.

Amortization Amount = Bond Interest Expense – Bond Interest Paid

The carrying value is the face amount minus any unamortized discount or plus any unamortized premium.

The term carrying value is synonymous with book value.

Present Value of the Principal $56,743

Present Value of the Interest Payments 36,048

Selling Price 92,791

Long term liabilities consist of an expected outflow of resources arising from present obligations that are not payable within a year or the operating cycle of the company whichever is longer.

Types of bond issues are (1) secured and unsecured bonds; (2) term, serial and callable bonds; (3) registered and bearer bonds; (4) income and revenue bonds.

A bond is the most common type of long-term debt.

The main purpose of issuing bonds is to borrow for the long term when the amount of capital needed is too large for one lender to supply.

Each bondholder receives a bond certificate showing the name of the company that borrowed the money, exactly like a note payable. The certificate specifies the face value, which is the amount of the bond issue.

Bonds issued at premium means, market interest rate is less than the stated interest rate of the bond issued.

Bonds issued at premium means, market interest rate is less than the stated interest rate of the bond issued. In other words, since the stated interest rate is more than the interest rate offered by any other investment instrument in the market, investors will pay more than the face value of the bond.