None QS 10-1 (Static) Advantages of bond financing LO A1Identify the following as either an advantage or a disadvantage of bond financing for a company./p>a. Bonds do not affect owner control.b. A company earns a lower return with borrowed funds than it pays in interest.c. A company earns a higher return with borrowed funds than it pays in interest.d. Bonds require payment of periodic interest.e. Interest on bonds is tax deductible.f. Bonds require payment of par value at maturity.

Advantage: Bonds do not affect owner controlWhen a company issues bonds, it is essentially borrowing…

Answered: QS 10-1 (Static) Advantages of bond…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Identify the following as either an advantage (A) or a disadvantage (D) of bond financing for a company. a. Requires payments of both periodic interest and par value at maturity. b. Bonds require payment of par value at maturity. C. Bonds do not affect owner control. d. A company earns a lower return with borrowed funds than it pays in interest. e. A company earns a higher return with borrowed funds than it pays in interest. f. Bonds require payment of periodic interest.
8. Which is least likely true about bonds? a. It is a financial security. b. The issuer has the obligation to make specified payments. c. Bondholders have the right to make decisions on the firm's affairs. d. Bondholders have the right to claim interest payments. е. с &d f. All of the above g. None of the above
Identify the following as either an advantage or a disadvantage of bond financing for a company. a. Bonds do not affect owner control. b. A company earns a lower return with borrowed funds than it pays in interest. c. A company earns a higher return with borrowed funds than it pays in interest. d. Bonds require payment of periodic interest. e. Interest on bonds is tax deductible. f. Bonds require payment of par value at maturity.
Q9 Advantage of Debt financing is: a. All of these b. Does not dilute owners control c. It reduces Weighted Average Cost of Capital (WACC) d. Interest is tax-deductible
while putable bonds are beneficial to the investor when interest rates go down, the downside is that they benefit the issuer when rates go up. True or False? Question 15Answer a. True b. False
QUESTION 18 What will be the effect of using book value of debt in WACC decisions if interest rates have decreased substantially since a firm's long-term bonds were issued? OA Cannot be determined without knowing interest rates. OB. The debt to-value ratio will be overstated. OC The debt-to-value ratio will be understated. OD. There will be no effect on WACC decisions.
Ma 2 Which of the following is NOT TRUE? Select one: O a. If the stated rate is equal to the market rate on the issuance date of a bond, no premium or discount on the bond will need to be recorded. O b. Private companies are required to amortize bonds payable using the effective-interest method. c. Public companies are required to amortize bonds payable using the effective-interest method. O d. All of the listed answers are not true. Notes
Ch 11 Bonds and LTL1. When will bonds sell at a premium and discount? 2. Calculate bond interest under SL method.3. Impact of amortization of bond premium/discount on interest expense.4. Give an example journal entry for amortization of bond premium/discount.5. What is the Gain/loss on redemption of bonds? How do you calculate?6. Understand method of calculating PV of future cash flows -specifically for a bond.7. Why are bonds a popular source of financing?8. Contract rate (market rate) is used for what calculation purpose?Ch 10 SE: Corporations1. What are Rights possessed by common stockholders?2. What are a journal entries for stock issuance, cash dividend, stock dividend?3. What is the calculation of dividends when cumulative preferred stock is outstanding?4. Journal entries for treasury stock, financial statement presentation. Gain/loss on reissue of treasury stock.5. Prior period adjustment - example of, accounting for?6. define, describe, why use Stock split 7. Stock dividend –…
Question 2 A lower bond rating directly translates into a higher, higher interest b. lower, higher interest Oc. higher; higher default d. lower, lower interest O e. higher; lower interest prices and PERS rates on the firm's bonds.
Exercise 2.4 Compared to bonds with longer maturity, bonds with shorter maturity respond. dramatically to changes in interest rates.
2. Bonds are sold at a premium if the a.market rate of interest was more than the stated rate at the time of issue. b.market rate of interest was less than the stated rate at the time of issue. c.company will have to pay a premium to retire the bonds. d.issuing company has a better reputation than other companies in the same business.
A discount on bonds payable: O Occurs when a company issues bonds with a contract rate less than the market rate Occurs when a company issues bonds with a contract rate more than the market rate O Increases the Bond Payable account O Decreases the total bond interest expense O Is not allowed in many states to protect creditors

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