Choose the Statement That Correctly Summarizes the Tax Advantage of Raising

Multiple Choice

Choose the statement that correctly summarizes the tax advantage of raising money by issuing bonds instead of common stock:

A) The amount paid by the corporation to redeem bonds at maturity date is deductible in computing income subject to corporate income tax.
B) Interest payments are deductible in determining income subject to corporate income tax;dividends are not deductible.
C) A corporation must pay tax on the sales price of stock issued,but is not taxed on the amount received when bonds are issued.
D) Both interest and dividends paid are deductible in computing taxable income,but since interest must be paid annually,the corporation usually gets a larger tax deduction over the life of the bonds payable.