Vocabulary Words CHAPTER 14 - rate method The method of...

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Vocabulary Words - UNIT 8 – Chapter 14: Bond A form of an interest-bearing note used by corporations to borrow on a long-term basis. Bond indenture The contract between a corporation issuing bonds and the bondholders. Carrying amount The balance of the bonds payable account (face amount of the bonds) less any unamortized discount or plus any unamortized premium. Contract rate The periodic interest to be paid on the bonds that is identified in the bond indenture; expressed as a percentage of the face amount of the bond. Discount The interest deducted from the maturity value of a note or the excess of the face amount of bonds over their issue price. Earnings per common share (EPS) Net income per share of common stock outstanding during a period. Earnings per share (EPS) on common stock The profitability ratio of net income available to common shareholders to the number of common shares outstanding. Effective interest
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Unformatted text preview: rate method The method of amortizing discounts and premiums that provides for a constant rate of interest on the carrying amount of the bonds at the beginning of each period; often called simply the interest method. Effective rate of interest The market rate of interest at the time bonds are issued. Installment note A debt that requires the borrower to make equal periodic payments to the lender for the term of the note. Market rate of interest The rate determined from sales and purchases of similar bonds. Mortgage notes An installment note that may be secured by a pledge of the borrower's assets. Number of times interest charges are earned A ratio that measures creditor margin of safety for interest payments, calculated as income before interest and taxes divided by interest expense. Premium The excess of the issue price of a stock over its par value or the excess of the issue price of bonds over their face amount....
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