Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

A bond indenture is:

a type of liability that must be paid within one year

an account used to record interest expense on bonds

a legal contract between the bond issuer and bondholders specifying the terms of the bond

a method for amortizing bond premiums

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Verified step by step guidance

Understand the term 'bond indenture': A bond indenture is a legal document that outlines the terms and conditions of a bond agreement between the issuer (borrower) and the bondholders (lenders). It specifies details such as the interest rate, maturity date, payment schedule, and any covenants or restrictions.

Clarify why the other options are incorrect: The first option ('a type of liability that must be paid within one year') refers to current liabilities, not bond indentures. The second option ('an account used to record interest expense on bonds') describes an accounting entry, not a legal contract. The fourth option ('a method for amortizing bond premiums') refers to an accounting method, not the bond indenture itself.

Focus on the correct answer: The correct answer is 'a legal contract between the bond issuer and bondholders specifying the terms of the bond.' This is the definition of a bond indenture and highlights its role in formalizing the bond agreement.

Explain the importance of a bond indenture: It protects the interests of both the issuer and the bondholders by clearly defining the obligations and rights of each party. It also ensures compliance with legal and financial regulations.

Summarize the concept: A bond indenture is a foundational document in bond issuance, serving as a legal framework for the bond's terms and conditions, and is distinct from accounting entries or methods of amortization.