Multiple Choice
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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)
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Solution Summary
The solution explains some multiple choice questions relating to bondholder exchange, inventory entries and dividends
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1. c) bonds for common stock
Convertibility means that bonds can be exchanged for shares
2. a) increasing the ...
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