Claudia is a student at Michiana College near Lake Michigan. She is young, intelligent, and driven to succeed in her studies. Claudia is not sure what she wants to do with her life but she knows she does NOT want to be an accountant! In fact, her closest friends and family members have gently urged her to enroll in anger management ever since she began studying accounting last term. Now Claudia is starting Principles of Accounting II and she is going to try really hard not to punch the wall or throw her book across the room anymore but she makes no promises... Now comes Chapter 14. “Why would a company issue bonds when it could just sell more stock to raise money?” Claudia muttered to herself, fuming. “It’s always better for a company to increase its equity than to increase its debt. Even I know that!” (1) Please evaluate Claudia’s comments. Do you agree? Is there any validity to what she said?

Claudia is a student at Michiana College near Lake Michigan. She is young, intelligent, and driven to succeed in her studies. Claudia is not sure what she wants to do with her life but she knows she does NOT want to be an accountant! In fact, her closest friends and family members have gently urged her to enroll in anger management ever since she began studying accounting last term. Now Claudia is starting Principles of Accounting II and she is going to try really hard not to punch the wall or throw her book across the room anymore but she makes no promises... Now comes Chapter 14. “Why would a company issue bonds when it could just sell more stock to raise money?” Claudia muttered to herself, fuming. “It’s always better for a company to increase its equity than to increase its debt. Even I know that!” (1) Please evaluate Claudia’s comments. Do you agree? Is there any validity to what she said?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter6: Business Expenses

Section: Chapter Questions

Problem 73IIP

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Claudia is a student at Michiana College near Lake Michigan. She is young, intelligent, and driven to succeed in her studies. Claudia is not sure what she wants to do with her life but she knows she does NOT want to be an accountant! In fact, her closest friends and family members have gently urged her to enroll in anger management ever since she began studying accounting last term. Now Claudia is starting Principles of Accounting II and she is going to try really hard not to punch the wall or throw her book across the room anymore but she makes no promises... Now comes Chapter 14. “Why would a company issue bonds when it could just sell more stock to raise money?” Claudia muttered to herself, fuming. “It’s always better for a company to increase its equity than to increase its debt. Even I know that!” (2) What is “earnings per share” and how can it be affected by issuing bonds or stocks? How is it calculated?
Claudia has actually made it to the final week of her accounting class! However, her brain is going on strike and she is desperately ready for a break! The only thing in worse shape than her mind is her poor accounting book which has been punched, torn, and thrown across the room countless times. Now she's reviewing Chapter 13 and none of it is making sense to her. Right now you are the only level-headed and calming influence in Claudia's life and she has turned to you to please explain the following: (1) What is treasury stock and what type of account is it? (2) From an accounting standpoint, isn't treasury stock just a regular equity account with a normal credit balance? (3) Why don't corporations pay dividends on shares of treasury stock?
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