14 debit bonds payable and credit cash 15 when a

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14. Debit Bonds Payable and credit Cash. 15. When a company calls bonds, means that they pay off bonds at a specific price before the maturity date. 16. The two categories that are reported in the balance sheet are the categories of current and long- term liabilities. Current liabilities are accounts like: Accounts Payable, Interest Payable, Salaries Payable, etc. Long-term Liabilities are accounts like: Mortgage payable, Notes payable, etc. 17. Debt to equity ratio shows the proportion of total liabilities relative to the total equity. Debt to equity ratio = Total Liabilities / Total Equity. 18. The first key factor is principal amount which represents the amount of the investment or borrowing. The number of periods which represents the length of time from the beginning of the investment or borrowing until termination. The interest rate which represents the percentage earned on the investment or paid on the borrowing and can be stated annually or in days, months or quarters. 19. An annuity is a stream of equal cash payments made at equal time intervals. 20. Simple interest is calculated only on the principal amount while compound interest means that interest is calculated on the principal and all previously earned interest, by assuming that all interest revenue remains invested and earn additional interest. 21. Effective-interest amortization method is a model that calculates interest expense based on the current carrying amount of the bond and the market interest rate at issuance, then amortizes the difference between the cash interest payment and calculated interest expense as a decrease to the discount or premium.

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