ACC 291 Week 2 Discussion Questions and Responses
DQ1: While at the water fountain one morning, you overhear two of your co-workers discussing how the market price of a bond is determined. One of them mentions that she believes that the market price of a bond is solely a function of the amount of the principal payment at the end of the term of a bond. Is she right? Discuss.
DQ 2: An employee’s net pay consists of gross pay less mandatory and voluntary payroll deductions. Identify the mandatory payroll deductions and give two or three examples of common voluntary deductions. Are these deductions recognized as payroll expenses by the employer? What type of payroll expenses does the employer incur related to having a payroll? What types of reports are used to document to the government the payroll taxes paid by the employee and employer?
DQ3: Why do companies issue bonds? Describe the two major obligations incurred by a company when bonds are issued. As an investor, would you rather buy a bond at a discount or a premium rate? Why or why not? What is the determining factor of whether a bond is sold at a discount, face, or premium?
Assume you are the CEO of a large corporation need to raise funds. (a) As a source of long-term financing, what are the major advantages of bonds over common stock? (b) What are the major disadvantages in using bonds for long-term financing?
DQ4: What is a current liability (give examples of current liabilities)? What is liquidity? What are two measures of liquidity? What are long-term liabilities? Give three examples.
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