Which of the Following Statements Concerning the Use of Sinking

question 1

Multiple Choice

Which of the following statements concerning the use of sinking funds to repurchase a bond issue is NOT true?

• A) A firm should make regular payments into a sinking fund administered by a trustee over the life of the bond.
• B) A firm can reduce the amount of outstanding debt without affecting the cash flows of the remaining bonds.
• C) Payments from the sinking fund are used to repurchase bonds.
• D) Bonds can be issued with a sinking fund provision or a call provision, but not both.

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Definitions:

Accounts Receivable

Monies owed to a company by customers for products or services that have been delivered or used but not yet paid for.

Aging the Accounts

The process of categorizing and reviewing accounts receivable based on the length of time an invoice has been outstanding.

Adjusting Entry

A journal entry made in accounting records to update the balances of accounts at the end of an accounting period.

Bad Debt Expense

An estimate of receivables that a company does not expect to collect, recognized as an expense in the income statement.