Final Exam

Answer The Following Questions:

1. A bond carries a stated rate of interest of 6% and par of $1,000. It matures in 20 years. It is sold at 83 (83% of $1,000, or $830).

a. Under normal conditions, why would the bond sell at less than par?

b. How would the discount be disclosed on the statements?

2. What is the difference in the impact on financial statements of a stock dividend versus a stock split?

3. Explain the relationship between the income statement and the reconciliation of retained earnings.

4. Differentiate between the types of inventory typically held by a retailing firm and a manufacturing firm.

5. Briefly describe how each of these groups might use financial reports: managers, investors, and creditors.

6. Suppose you are comparing two firms within an industry. One is large and the other is small. Will relative or absolute numbers be of more value in each case? What kinds of statistics can help evaluate relative size?

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