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Acct. test 4 review.docx - Accounting 215 Test 4 Study...

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Accounting 215 Test 4 Study Guide Chapter 10 Characteristics of Bonds -are written promises by organizations to repay amounts loaned with interest -written promise to pay the bond’s par (or face) value and interest at a stated contract rate; often issued in denominations of $1000 -is its issuer’s written promise to pay ana mount equaling the par calue of the bond with interest -most bonds require the issuer to make semiannual interest pay ments -bonds do no affect owner contrl -interest on bonds is tax deductible bonds can increase return on equity -Bonds can decrease return on equity -Bonds require payment of both periodic interest and the par value at maturity Par value, Contract rate, bond date, maturity date, indenture Bond indenture- contract between the bond issuer and the bondholders; identifies the partie’s rights and obligations Par value- amount the bond issuer agrees to pay at maturity and the amount on which cash interst payments are based; also called face amount or face value of a bond
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