Question

A corporation issued bonds in order to acquire cash. This transaction:

a. Decreased the corporation’s stockholders’ equity.
b. Decreased the corporation’s revenue
c. Increased the corporation’s liabilities
d. Increased the corporation's stockholders' equity.

Answer 1

When a corporation issues bonds to acquire cash, it increases the corporation's liabilities. The corporation becomes obligated to repay the principal amount of the bonds to the bondholders, along with periodic interest payments.

Step-by-step explanation:

When a corporation issues bonds to acquire cash, it increases the corporation's liabilities. Bonds are a form of debt, and when a corporation issues them, it is essentially borrowing money from investors or bondholders. The corporation becomes obligated to repay the principal amount of the bonds to the bondholders, along with periodic interest payments.

For example, if a corporation issues $1,000,000 in bonds with a 5% coupon rate, it would have $1,000,000 in increased liabilities. The corporation would need to make interest payments of $50,000 annually to the bondholders, and eventually repay the $1,000,000 principal amount at maturity.