Question
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
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 Microsofts 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% |
|
How was accounting equation impacted by the bond issuance?
A. Assets increased, liabilities increased, equity increased. | |
B. Assets increased, liabilities increased, equity decreased. | |
C. Assets increased, liabilities increased, equity unaffected. | |
D. Assets decreased, liabilities increased, equity unaffected |
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