On April 1, 20X6, Owen issued $100,000 of 12%, 10-year bonds. The bonds were iss

Question

On April 1, 20X6, Owen issued $100,000 of 12%, 10-year bonds. The bonds were issued at par plus accrued interest, are dated January 1, 20X6, and pay interest on July and January 1. Interest expense for the year ending December 31, 20X6 is:

A.   $12,000.
B.   $9,000.
C.   $6,000.
D.   $3,000.
E.   None of these.

Which of the following statements is true?

A.   Preemptive rights make it easy for a corporation to issue additional shares.
B.   One purpose of a corporation is to avoid "double taxation."
C.   A corporate entity is typically of unlimited duration.
D.   A corporation can issue common or preferred stock, but not both.
E.   None of these.

Explanation / Answer

Since the bond is issued with effective date as Jan 1 ,the interest will accrue for whole year.

Hence ,annual interest =12,000

C is true as a corporate entity has a perpetual existence.It is an artificial person.

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