The Ajax Corporation Issues Bonds That Pay a Minimum of 6

question 56

Multiple Choice

The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay more if corporate earnings reach certain specified levels.In lieu of payment under this bond,a holder may exchange it for stock of the corporation.This bond would be a:

• A) callable income bond.
• B) convertible participating bond.
• C) convertible unsecured bond.
• D) convertible secured bond.

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Definitions:

Journal Entry

The form of recording a transaction in a journal.

Maker

The entity or individual who creates or produces something, often used in contexts involving manufacturing or crafts.

Allowance for Doubtful Accounts

An accounting provision made to accommodate likely losses on accounts receivable due to customers being unable to pay.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the appropriate period for more accurate financial statements.