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Multiple Choice

1. Convertibility allows a bondholder to exchange:
a)subordinated debentures for unsubordinated debentures
b)debentures for secured debt
c)bonds for common stock
d)All of these answers are correct.

2. The Beehive Company acquired merchandise inventory costing $10,000 on September 1. The company will not pay for the inventory until October 1. This transaction will affect the Beehive Company by:
a)increasing the Merchandise Inventory account by $10,000 and increasing the Accounts Payable account by $10,000
b)increasing the Merchandise Inventory account by $10,000 and decreasing the Accounts Payable account by $10,000
c)increasing the Merchandise Inventory account by $10,000 and increasing the Capital account by $10,000
d)increasing the Merchandise Inventory account by $10,000 and decreasing the Capital account by $10,000

3. The balances in selected accounts of Rerun Company increased (decreased) as follows:
Accounts Payable $10,000
Bonds payable (12,000)
Common stock 4,000

Rerun Company declared and paid dividends of $8,800. The cash flow from financing for Rerun Company was:

a)$16,800
b)$6,800
c)$(6,800)
d)$(16,800)

Solution Preview

1. c) bonds for common stock

Convertibility means that bonds can be exchanged for shares

2. a) increasing the ...

Solution Summary

The solution explains some multiple choice questions relating to bondholder exchange, inventory entries and dividends

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