which of the following is not an advantage of issuing bonds instead of common stock course hero

The earnings per share on common stock may be lower is not an advantage of issuing bonds instead of common stocks. Bond Advantages When issuing bonds, instead of common stock, a company may be able to deduct the interest payments as an expense for tax purposes whereas a dividend payment is not a deductible expense.

Full Answer

Which is not an advantage of issuing bonds instead of common stock?

The earnings per share on common stock may be lower is not an advantage of issuing bonds instead of common stocks. When issuing bonds, instead of common stock, a company may be able to deduct the interest payments as an expense for tax purposes whereas a dividend payment is not a deductible expense.

How does effective interest affect the carrying value of discounted bonds?

The amount of periodic interest expense decreases over the life of a discounted bond issue when the effective interest method is used c. Over the life of the bond, the carrying value increases for discounted bonds when using the effective interest method d.

What is the journal entry for issuing bonds at a discount?

The trustee keeps records of each bondholder The journal entry to record the issuance of bonds at a discount will include a a. debit to Cash for the face amount of the bonds. b. debit to Cash for the face amount of the bonds plus the amount of the discount.

Do bonds dilute shareholders’ control of the corporation?

Furthermore, bondholders do not control the corporation. As a result, the issuance of bonds does not dilute the percentage ownership of current shareholders and thus does not impact the shareholders’ control of the corporation.

Which of the following is not an advantage of issuing bonds instead of ordinary shares?

The correct option is c. The reduction in the earnings per share amount is not an advantage of issuing or providing the bonds in place of the stock.... See full answer below.

Which of the following is an advantage of issuing bonds instead of common stock?

Advantages of Issuing Bonds Instead of Stock There are several advantages of issuing bonds (or other debt) instead of issuing shares of common stock: Interest on bonds and other debt is deductible on the corporation's income tax return while the dividends on common stock are not deductible on the income tax return.

Which of the following is an advantage of issuing bonds?

Advantages to issuing bonds Retaining earnings: Issuing bonds allows a company to access capital much faster than if it first had to earn and save profits. As the saying goes, you have to spend money to make money. Selling assets: To sell assets, a company needs to have assets it's willing to sell.

When callable bonds are redeemed below the carrying amount?

When callable bonds are redeemed below carrying value, it is a)true that a Loss on Redemption of Bond is debited. The call will debit the bonds payable and any discount that the bond is carrying.

Which is not an advantage of issuing bonds?

Answer: Earnings per share on common stock may be lower. What is this? The earnings per share on common stock may be lower is not an advantage of issuing bonds instead of common stocks.

Which of the following is a disadvantage of issuing bonds instead of common shares?

Disadvantage of issuing corporate bonds regular interest payments to bondholders - though interest may be fixed, the interest will usually have to be paid even if you make a loss.

What are the disadvantages of issuing bonds?

Bonds do have some disadvantages: they are debt and can hurt a highly leveraged company, the corporation must pay the interest and principal when they are due, and the bondholders have a preference over shareholders upon liquidation.

What are the advantages and disadvantages of bonds?

Bonds pay regular interest, and bond investors get the principal back on maturity. Credit-rating agencies rate bonds based on creditworthiness. Low-rated bonds must pay higher interest rates to compensate investors for taking on the higher risk. Corporate bonds are usually riskier than government bonds.

What are the disadvantages of bonds?

Risks Involved are concerning Disadvantages of Bonds There are many other risks involved with Bonds, namely, Credit risk, Inflation risk, Liquidity risk, and Call risk. Credit risk: When the issuer fails to timely make interest or principal payments and defaults on its bonds.

When the bonds are sold for more than their face value the carrying value of the bonds is equal to?

Bond Premium is the difference between the price at which a bond is sold and the bond's face value when the bond is sold more than face value.

When the maturities of a bond issue are spread over several dates various times the bonds are called?

Serial bonds in a given bond issue have maturities spread over several dates. For instance, one-fourth of the bonds may mature on 2011 December 31, another one-fourth on 2012 December 31, and so on.

When the market rate of interest on bonds is higher than the contract rate?

a discount. When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at a discount.

Which method applies a constant percentage to the bond carrying value to compute interest expense?

d. The effective interest method applies a constant percentage to the bond carrying value to compute interest expense

How are bonds sold?

a. Bonds are generally sold through an investment company

Which method of accounting requires use of the effective interest method?

a. GAAP requires use of the effective interest method

When is no entry required for engagement?

d. No entry is required when the engagement is concluded.

What is the difference between interest expense and interest to be paid?

c. The difference between the interest expense and the interest to be paid is the bond's par value