Choose the Statement That Correctly Summarizes the Tax Advantage of Raising

question 116

Multiple Choice

Choose the statement that correctly summarizes the tax advantage of raising money by issuing bonds instead of common stock:

• A)The amount paid by the corporation to redeem bonds at maturity date is deductible in computing income subject to corporate income tax.
• B)Interest payments are deductible in determining income subject to corporate income tax;dividends are not deductible.
• C)A corporation must pay tax on the sales price of stock issued,but is not taxed on the amount received when bonds are issued.
• D)Both interest and dividends paid are deductible in computing taxable income,but since interest must be paid annually,the corporation usually gets a larger tax deduction over the life of the bonds payable.

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Definitions:

Limited Supervision

This term describes a work environment where employees are given the freedom to complete tasks and make decisions with minimal oversight from managers or supervisors.

Influenza Epidemic

A widespread occurrence of the influenza virus in a community at a particular time, often causing significant illness and fatalities.

Flu Shot

A flu shot is a vaccine that protects against the influenza virus, designed to stimulate the body's immune system to prepare it to fight the virus if exposed.

Marginal Cost

The cost increase attributed to the manufacture of an additional product or service unit.