State the advantages of issuing bonds instead of stock

Question

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Answer 1

Question

Chapter 10, Problem 1Q

To determine

State the advantages of issuing bonds instead of stock

Expert Solution & Answer

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Stock: It refers to a security issued in a form of certificate and implies the right of ownership of an investor over a portion of company’s earnings and assets.

Some advantages of issuing bonds instead of stock are as follows:

Issue of bonds is less expensive than issue of shares.
The interests on bonds are tax deductible. However, dividends from shares are not tax deductible.
Issue of bonds does not affect the percentage of ownership of an investor in the company.
Stockholders’ control is not affected in the bonds.
Earnings per share of bonds are high compare to common stock.

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PART 2. (22 marks) Mangal Furnishings produce serving trays for the tourist industry in a five-stage process - Cutting & Shaping, Assembly, Sanding, Finishing and Packaging. Upon entering the finishing process, before the trays are stained and polished, a specialized piece of equipment is used to engrave a logo on each tray. After Packaging, the trays are sent to the business warehouse for delivery to customers. The following data relates to the Finishing Process for the month of March during which 3,800 trays valued at $597.90 each were transferred in from the Sanding Process. Other production costs incurred during the month are summarized as follows: Direct Materials Added Direct Manufacturing Wages Hireage cost of specialized logo equipment Manufacturing Overhead $343,380 $830,150 $21,300 $412,100 Process inspection occurs during the process and normally 2% of the trays entering the Finishing process are rejected and sold as scrap to local retailers at $750 each. During the month…

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Answer 2

Question

Chapter 10, Problem 1Q

To determine

State the advantages of issuing bonds instead of stock

Expert Solution & Answer

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Stock: It refers to a security issued in a form of certificate and implies the right of ownership of an investor over a portion of company’s earnings and assets.

Some advantages of issuing bonds instead of stock are as follows:

Issue of bonds is less expensive than issue of shares.
The interests on bonds are tax deductible. However, dividends from shares are not tax deductible.
Issue of bonds does not affect the percentage of ownership of an investor in the company.
Stockholders’ control is not affected in the bonds.
Earnings per share of bonds are high compare to common stock.

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Answer 3

Question

Chapter 10, Problem 1Q

To determine

State the advantages of issuing bonds instead of stock

Expert Solution & Answer

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Stock: It refers to a security issued in a form of certificate and implies the right of ownership of an investor over a portion of company’s earnings and assets.

Some advantages of issuing bonds instead of stock are as follows:

Issue of bonds is less expensive than issue of shares.
The interests on bonds are tax deductible. However, dividends from shares are not tax deductible.
Issue of bonds does not affect the percentage of ownership of an investor in the company.
Stockholders’ control is not affected in the bonds.
Earnings per share of bonds are high compare to common stock.

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Answer 4

Question

Chapter 10, Problem 1Q

To determine

State the advantages of issuing bonds instead of stock

Expert Solution & Answer

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Stock: It refers to a security issued in a form of certificate and implies the right of ownership of an investor over a portion of company’s earnings and assets.

Some advantages of issuing bonds instead of stock are as follows:

Issue of bonds is less expensive than issue of shares.
The interests on bonds are tax deductible. However, dividends from shares are not tax deductible.
Issue of bonds does not affect the percentage of ownership of an investor in the company.
Stockholders’ control is not affected in the bonds.
Earnings per share of bonds are high compare to common stock.

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Answer 5

Chapter 10, Problem 1Q

To determine

State the advantages of issuing bonds instead of stock

Expert Solution & Answer

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Stock: It refers to a security issued in a form of certificate and implies the right of ownership of an investor over a portion of company’s earnings and assets.

Some advantages of issuing bonds instead of stock are as follows:

Issue of bonds is less expensive than issue of shares.
The interests on bonds are tax deductible. However, dividends from shares are not tax deductible.
Issue of bonds does not affect the percentage of ownership of an investor in the company.
Stockholders’ control is not affected in the bonds.
Earnings per share of bonds are high compare to common stock.

Answer 6

Chapter 10, Problem 1Q

To determine

State the advantages of issuing bonds instead of stock

Expert Solution & Answer

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Stock: It refers to a security issued in a form of certificate and implies the right of ownership of an investor over a portion of company’s earnings and assets.

Some advantages of issuing bonds instead of stock are as follows:

Issue of bonds is less expensive than issue of shares.
The interests on bonds are tax deductible. However, dividends from shares are not tax deductible.
Issue of bonds does not affect the percentage of ownership of an investor in the company.
Stockholders’ control is not affected in the bonds.
Earnings per share of bonds are high compare to common stock.

Answer 7

Chapter 10, Problem 1Q

To determine

State the advantages of issuing bonds instead of stock

Answer 8

Expert Solution & Answer

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Stock: It refers to a security issued in a form of certificate and implies the right of ownership of an investor over a portion of company’s earnings and assets.

Some advantages of issuing bonds instead of stock are as follows:

Issue of bonds is less expensive than issue of shares.
The interests on bonds are tax deductible. However, dividends from shares are not tax deductible.
Issue of bonds does not affect the percentage of ownership of an investor in the company.
Stockholders’ control is not affected in the bonds.
Earnings per share of bonds are high compare to common stock.