Question

Note: Each problem on this quiz has only ONE correct answer. Please, pick the best answer...

Note: Each problem on this quiz has only ONE correct answer. Please, pick the best answer

Please use the following information to answer questions 1 through 4.
In August 2016, Microsoft Inc. sold $19.75 billion bonds to partially fund its acquisition of LinkedIn Corp ($26.2 billion). In January 2017, Microsoft Inc. issued another $17 billion in bonds (see the table below). Since most credit rating agencies rated Microsoft credit as AAA, bond interest managed to very favorable interest rates (the better the credit rating, the smaller interest rates the company could enjoy). Proceeds from the seven-part deal, were expected to be used for general corporate purposes, including stock buybacks and refinancing (the repayment of short-term debt used to help fund Microsoft’s acquisition of LinkedIn Corp).

Part

Billion

Interest

Due date

Maturity

1

1.5

1.85%

2020

3 years

2

1.75

2.40%

2022

5 years

3

2.25

2.875%

2024

7 years

4

4

3.30%

2027

10 years

5

2.5

4.10%

2037

20 years

6

3

4.25%

2047

30 years

7

2

4.50%

2057

40 years

             Total 17 billion

Effective: 3.45%

What journal entry did Microsoft make when it issued $17 billion in bonds (ignore underwriting fees)?

  • A.
    Assets = Liabilities Stockholders' Equity Revenue - Expense = Net Income Statement of Cash flow
    Cash + Prepaid expenses = Accounts payable + Bonds payable + Common Stock + Retained earnings - =
    17 billion + = + + + 17 billion 17 billion - = 17 billion 17 billion OA
  • B.
    Assets = Liabilities Stockholders' Equity Revenue - Expense = Net Income Statement of Cash flow
    Cash + Prepaid expenses = Accounts payable + Bonds payable + Common Stock + Retained earnings - =
    17 billion + = + 17 billion + + - = 17 billion FA
  • C.
    Assets = Liabilities Stockholders' Equity Revenue - Expense = Net Income Statement of Cash flow
    Cash + Prepaid expenses = Accounts payable + Bonds payable + Common Stock + Retained earnings - =
    17 billion + = 17 billion + + + - = 17 billion FA
  • D.
    Assets = Liabilities Stockholders' Equity Revenue - Expense = Net Income Statement of Cash flow
    Cash + Prepaid expenses = Accounts payable + Bonds payable + Common Stock + Retained earnings - =
    17 billion + = + 17 billion + + - = 17 billion OA
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