Which of the Following Statements Is Incorrect

question 38

Multiple Choice

Which of the following statements is incorrect?

• A) It is common for companies to both retire debt and issue new bonds in the same year as a way to replace higher interest rate debt with lower interest rate issuances.
• B) The cash payment of interest is reported as a cash flow from operating activities.
• C)Retiring bonds by paying cash creates a cash flow from investing activities when the issuing corporation buys the bonds back from investors.
• D)The cash payment to call an outstanding bond issue is reported as a cash flow from financing activities.

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Definitions:

Trade-In Allowance

The value that a dealer offers to a customer for the customer's used item (e.g., car) when purchasing a new item.

Accumulated Depreciation

The total depreciation for a fixed asset that has been charged to expense since the asset was acquired and made available for use.

Commercial Substance

A concept in accounting that indicates a transaction significantly alters the economic position or cash flows of an entity.

Straight-Line Depreciation

A strategy for dividing the cost of a substantial asset through its operational life in even yearly portions.