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Which of the following statements is incorrect?
A) It is common for companies to retire bonds and also issue new bonds in the same year as a way to replace higher interest rate debt with lower interest rate issuances.
B) The cash payment of interest is reported as a cash flow from operating activities.
C) Retiring bonds by paying cash creates a cash flow from investing activities when the issuing company buys the bonds back from investors.
D) The cash payment to call an outstanding bond issue is reported as a cash flow from financing activities.
Bonds
Securities that provide a fixed return, symbolizing a lending agreement between an investor and a borrower, usually involving corporations or government entities.
Retire
In finance and accounting, this term typically refers to the process of paying off or settling a debt or obligation, such as bonds or mortgages.
Financial Activities
Transactions related to managing the company's finances, including raising capital, repaying investors, and dividends distribution.
- Grasp the influence that journal entries have on the financial statements when dealing with bond transactions.
- Comprehend the effects on accounting and financial reports due to bond retirement, including the recognition of gains or losses.
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Learning Objectives
- Grasp the influence that journal entries have on the financial statements when dealing with bond transactions.
- Comprehend the effects on accounting and financial reports due to bond retirement, including the recognition of gains or losses.
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