Question

In which of the following transactions is the corporation borrowing money?

a. The corporation issued common stock.
b. The corporation issued preferred stock.
c. The corporation issued treasury stock.
d. The corporation issued corporate bonds.
e. All the above.

Answer 1

A corporation is borrowing money when it issues corporate bonds, which commits it to making scheduled interest payments regardless of income.

Therefore, option D is correct.

Step-by-step explanation:

In which of the following transactions is the corporation borrowing money? Among the options provided, a corporation is borrowing money when it issues corporate bonds. When a corporation issues bonds, it is essentially obtaining a loan from the bondholders, to whom it must make scheduled interest payments, and principal repayment upon maturity. This is contrasted with issuing stock, either common or preferred, which involves selling ownership in the company and does not require repayment but may entail distribution of profits through dividends. Issuing treasury stock refers to a corporation reissuing its own previously outstanding stock shares that it had bought back.