Question 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.
Question 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
Question 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)