Your Questions About One Potential Advantage Of Financing Corporations Through The Use Of Bonds Rather Than Common Stock

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James asks…

One potential advantage of financing corporations through the use of bonds rather than common stock is?

a. the corporation must pay the bonds at maturity
b. the interest on bonds must be paid when due
c. a higher earning per share is guaranteed for existing common shareholders
d. the interest expense is deductible for tax purposes by the corporation

financi4 answers:

D. Is true

a. Bad for company
b. Bad for company
c. It’s not guaranteed, bonds just add leverage so eps can become higher or much lower.

Ken asks…

Accounting Help 10 pts!!!!!?

1.When a corporation issues bonds, the price that buyers are willing to pay for the bonds does not depend on which of the following below
a.face value of the bonds
b.market rate of interest
c.periodic interest to be paid on the bonds
d.denominations the bonds are sold

2.One potential advantage of financing corporations through the use of bonds rather than common stock is
a.the interest on bonds must be paid when due
b.the corporation must pay the bonds at maturity
c.the interest expense is deductible for tax purposes by the corporation
d.a higher earnings per share is guaranteed for existing common shareholders

3.The market interest rate related to a bond is also called the
a.stated interest rate
b.effective interest rate
c.contract interest rate
d.straight-line rate

4.The present value of $40,000 to be received in one year, at 6% compounded annually, is (rounded to nearest dollar)
a.$37,736
b.$42,400
c.$40,000
d.$2,400

5.A corporation issues for cash $8,000,000 of 8%, 25-year bonds, interest payable semiannually. The amount received for the bonds will be
a.present value of 50 semiannual interest payments of $320,000, plus present value of $8,000,000 to be repaid in 25 years
b.present value of 25 annual interest payments of $640,000
c.present value of 25 annual interest payments of $640,000, plus present value of $8,000,000 to be repaid in 25 years
d.present value of $8,000,000 to be repaid in 25 years, less present value of 50 semiannual interest payments of $320,000

6.The journal entry a company records for the payment of interest, interest expense, and amortization of bond premium is
a.debit Interest Expense, credit Cash and Premium on Bonds Payable
b.debit Interest Expense, credit Cash
c.debit Interest Expense and Premium on Bonds Payable, credit Cash
d.debit Interest Expense, credit Interest Payable and Premium on Bonds Payable

financi4 answers:

1.When a corporation issues bonds, the price that buyers are willing to pay for the bonds does not depend on which of the following below
a.face value of the bonds

2.One potential advantage of financing corporations through the use of bonds rather than common stock is
c.the interest expense is deductible for tax purposes by the corporation

3.The market interest rate related to a bond is also called the
b.effective interest rate

4.The present value of $40,000 to be received in one year, at 6% compounded annually, is (rounded to nearest dollar)
a.$37,736

5.A corporation issues for cash $8,000,000 of 8%, 25-year bonds, interest payable semiannually. The amount received for the bonds will be
a.present value of 50 semiannual interest payments of $320,000, plus present value of $8,000,000 to be repaid in 25 years

6.The journal entry a company records for the payment of interest, interest expense, and amortization of bond premium is
c.debit Interest Expense and Premium on Bonds Payable, credit Cash

Daniel asks…

Accounting Help 10 pts!!!!!!!!?

1.When a corporation issues bonds, the price that buyers are willing to pay for the bonds does not depend on which of the following below
a.face value of the bonds
b.market rate of interest
c.periodic interest to be paid on the bonds
d.denominations the bonds are sold

2.One potential advantage of financing corporations through the use of bonds rather than common stock is
a.the interest on bonds must be paid when due
b.the corporation must pay the bonds at maturity
c.the interest expense is deductible for tax purposes by the corporation
d.a higher earnings per share is guaranteed for existing common shareholders

3.The market interest rate related to a bond is also called the
a.stated interest rate
b.effective interest rate
c.contract interest rate
d.straight-line rate

4.The present value of $40,000 to be received in one year, at 6% compounded annually, is (rounded to nearest dollar)
a.$37,736
b.$42,400
c.$40,000
d.$2,400

5.A corporation issues for cash $8,000,000 of 8%, 25-year bonds, interest payable semiannually. The amount received for the bonds will be
a.present value of 50 semiannual interest payments of $320,000, plus present value of $8,000,000 to be repaid in 25 years
b.present value of 25 annual interest payments of $640,000
c.present value of 25 annual interest payments of $640,000, plus present value of $8,000,000 to be repaid in 25 years
d.present value of $8,000,000 to be repaid in 25 years, less present value of 50 semiannual interest payments of $320,000

6.The journal entry a company records for the payment of interest, interest expense, and amortization of bond premium is
a.debit Interest Expense, credit Cash and Premium on Bonds Payable
b.debit Interest Expense, credit Cash
c.debit Interest Expense and Premium on Bonds Payable, credit Cash
d.debit Interest Expense, credit Interest Payable and Premium on Bonds Payable

financi4 answers:

1.When a corporation issues bonds, the price that buyers are willing to pay for the bonds does not depend on which of the following below
a.face value of the bonds

2.One potential advantage of financing corporations through the use of bonds rather than common stock is
c.the interest expense is deductible for tax purposes by the corporation

3.The market interest rate related to a bond is also called the
b.effective interest rate

4.The present value of $40,000 to be received in one year, at 6% compounded annually, is (rounded to nearest dollar)
a.$37,736

5.A corporation issues for cash $8,000,000 of 8%, 25-year bonds, interest payable semiannually. The amount received for the bonds will be
a.present value of 50 semiannual interest payments of $320,000, plus present value of $8,000,000 to be repaid in 25 years

6.The journal entry a company records for the payment of interest, interest expense, and amortization of bond premium is
c.debit Interest Expense and Premium on Bonds Payable, credit Cash

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