In August 2018, Microsoft Inc. sold $19.75 billion bonds to partially fund its acquisition of Linkedin Corp ($28.2 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, ware 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 Linkedln Corp) Part Billion Interest Due dateMatur 2020 2022 2024 1.85% 2.40% 2.875% 3.30% 4.10% 4.25% 4.50% 3 years yearS / years 10 years 20 years 30 years 40 years 2 1.75 2.25 2.5 2047 7 2 2057 Total 17 billion Effective: 3.45% Questions What iournal did Microsoft make when it issued $17 billion in bonds (ignore underwriting fees)? Statement of Cash flow Assets Stockholders' Equity RevenueExpenseNet Income Accounts Bonds Cash Stock able 17 billion earni 17 billion OA 1 17 billion 17 billion IOA 17 billion FA 17 billion FA 17 billion b17 billion 17 billion 17 billion | + 17 billion d17 billion 117 billion OAoperating activity A investing activity FA-Financing activity 2. (1 point) How was accounting equation impacted by the bond issuance? s. Assets increased, lisbilities increased, equity increased b. Assets increased, liabilities increased, equity decreased c. Assets increased, liabilities increased, equity unaffected d. Assets decreased, liabilities increased, equity unaffected 3. (1 point) The effective interest rate for bond issuance in January 2017 was 3.45%. How much will it cost Microsoft to serve its new debt annually? (Put it differently, what is an interest expense related to the mentioned bond issuance? a 559 million b 5552.5 million c. $586.5 million d. $5.9 billion 4. (0.5 point) What is the resson Microsoft issued bonds instead of borrowing money from the bank? If you did not make relevant notes, you may find this summary helpful s. Bonds generally yield smaller interest rates b. Bank loans are more restrictive as banks may set up covenants c. Bond issuance enables corporations to attract a Jerge umbec of lenders: banks, insurance companies, pension funds etc. d. Company controls many options about bonds: maturity, ability to convert bonds into stocks e. All of the above are correct