Comprehended Intermediate Accounting Ii Units 4-6 Questions And Answers

Convertable Bonds: A. have priority over other indebtedness. B. are usually secured by a first or second mortgage. C. pay interest only in the event earning are sufficient to cover the interst. D. may be exchanged for equity securities. {Ans: } D. may be exchanged for equity securities.Corporations issue convertible debt for two main reasons. One is the desire to raise equity capital that, assuming conversion, will arise when the original debt is converted. The other is: A. the ease with which convertible debt is sold even if the company has a poor credit rating. B. the fact that equity capital has issue costs that convertible debt does not. C. that many corporations can obtain financing at lower rates. D. that convertible bonds will always sell at a premium. {Ans: } C. that many corporations can obtain financing at lower rates.When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be: A. reflected currently in income, but not as an extradorinary item. B. reflected currently in income as an extradorinary item. C. treated as a prior period adjustment. D. treated as an adjustment of addional paid-in