notes and bonds

Question 1

notes interest expense

Answer 1

interest expense (stated rate)
    int payable(market value)

Question 2

bonds interest expense

Answer 2

cash (market)
disc bp
bp

int expense(market)
disc bp
cash(stated)

Question 3

book value method shows

market value method shows

Answer 3

no loss or gain

loss or gain

Question 4

concessions-debt restructure
type 1
type 2

Answer 4

type 1 (bad for creditor) sumbv
new cf>bv of debt

Question 5

debt covenants are

Answer 5

clause to protect creditors. more risky the debt the more restrictive the covenant

Question 6

when bond pays higher rate than the market then it will sell for a

Answer 6

premium