I need help with 8 questions for an accounting assignment

NO GRAMMAR ERRORS, 0% PLAGIARISM

ANSWERS TO PROFESSOR’S QUESTIONS

1.  Financing

Why would a company prefer to issue bonds instead of issuing stocks to obtain financing?  Why would a company prefer to issue stocks instead of issuing bonds to obtain financing? ( at least 120 words with a reference)

2.  Liabilities

Why would you say is it important to separate current liabilities from long-term liabilities? ( at least 120 words with a reference)

3.  Contingencies

Please discuss contingencies and how they are reported on financial statements.  What conditions must be met before a contingency can be charged against income?

( at least 120 words with a reference)

4.  Method of Amortization

What is the effective interest method of amortization, and how is it different from or similar to the straight-line method of amortization?

( at least 120 words with a reference) 

RESPONSES TO PEERS’ POST

1.  Financing

If your business doesn’t have a stellar credit rating, you may not be able to borrow the money you need. If you incorporate, you can sell stock in your company instead. This is particularly attractive if you are a start-up with no track record. You can attract these investors based on your potential for profit and growth. Selling stock gives you the advantage of not owing any money to investors, because you are not borrowing. You don’t have to make any payments for the money you raise this way. In addition, a rising stock value can increase your credit rating and make it easier to borrow money in the future. Also, the constant need to justify your actions to shareholders can give your company a sharp focus and profitability.

( at least 120 words with a reference)

2.  Liabilities

Current liabilities are separated from longterm liabilities on  balance sheet. Current liabilities are the obligations that are due within one year of the balance sheet’s date and will require a cash payment or will need to be renewed. Knowing which liabilities will have to be paid within one year is important to lenders, financial analysts, owners, and executives of the company. Knowing the liabilities that are due within one year and the amount of assets turning to cash within one year are so important that it makes sense to prepare a classified balance sheet. The amount of current liabilities is used in two of the most common financial ratios.

( at least 120 words with a reference)

3.  Liabilities

As a balance sheet item, it is important to separate current liabilities from current liabilities; because current liabilities are short-term obligations that require the use of a company’s current asset resources within a one year operating cycle and usually consist of accounts payable, sales and income taxes payable, employee related liabilities.  On the other hand, long-term liabilities are obligation whichdo not require use of current asset resources and benefits the company greater than one year such as bond, mortgage, notes payable, and capital lease obligations.

( at least 120 words with a reference)

4.  Contingencies

Loss contingencies require the amount of the loss to be probable (the future event is “likely to occur”) and that the amount of the loss be reasonably estimable. When both of those recognition criteria are met,an accrual should be made. If the reasonably estimable loss is a range, it requires accrual of the amount that appears to be a better estimate than any other estimate within the range, or accrual of the minimum amount in the range if no amount within the range is a better estimate than any other amount. If the loss is probable, but the amount is not reasonably estimable, a disclosure to that effect must be made.

( at least 120 words with a reference)

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170 word answer 

• Describe whether the client’s debt is forgiven if the mortgage is rewritten, or if their mortgage will be written if they file Chapter 11. How will the reporting on the financial statement be determined?