Which of the Following Statements Regarding Sinking Fund Provisions Is

question 1

Multiple Choice

Which of the following statements regarding sinking fund provisions is FALSE?

• A)With a sinking fund,if a bond is trading below its face value,because the bonds are repurchased at par the decision as to which bonds to repurchase is made by lottery.
• B)With a sinking fund,instead of repaying the entire principal balance on the maturity date,the company makes regular payments into a sinking fund administered by a trustee over the life of the bond.
• C)Sinking fund provisions usually specify a minimum rate at which the issuer must contribute to the fund.
• D)Because the sinking fund allows the issuer to repurchase the bonds at par,the option to accelerate the payments is another form of call provision.

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Definitions:

Operation Costing

A hybrid costing system that combines aspects of both job costing and process costing, often used in manufacturing goods that have both common and unique characteristics.

Service Businesses

Companies that primarily earn revenue through providing intangible products, such as services or experiences, rather than physical products.

Routine and Repetitive

Activities or tasks that occur on a regular basis with little variation, often requiring minimal decision-making or innovation.

Work in Process Inventory

The inventory that includes goods in the middle of the manufacturing process, not yet completed.