Which of the Following Statements Is True

question 25

Multiple Choice

Which of the following statements is true?

• A) The corporation will have cash inflow when bonds are issued for an amount equal to, greater than, or less than the par value of the bonds.
• B) The corporation will have an outflow of cash connected to an investing activity when interest is paid to bond investors.
• C) The corporation will have to pay cash to bond investors when those investors demand to call the bonds.
• D) An outflow of cash when convertible bonds are converted is a financing activity.

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Definitions:

Discount on Bonds Payable

The variance between a bond's nominal value and the lesser amount it is sold for in the market.

Long-Term Liabilities

Debts or obligations of a business that are due for repayment in a period longer than one year.

Installment Note

A loan that requires regular payments, or installments, over a period, which covers both principal and interest.

Interest Expense

The cost incurred by an entity for borrowed funds, typically expressed as a yearly rate.