Susan Kline works for Trend Press, a fairly large book publishing firm. Her best friend and rival, Lisa, works for Silver Books, a smaller publisher. Both companies issue $100,000 in bonds on July 1. Trend's bonds were issued at a discount, while Silver's were issued at a premium. Lisa sent Susan a fax the next day. She told Susan that it was obvious who the better publisher was—the market had shown its preference! She reminded Susan again of her recent increase in salary as further proof of the superiority of Silver Books.
Draft a short note for Susan to send to Lisa. Explain how such a result could occur.
Jay Pembroke started a business in April. Prepare a Statement of Owner's Equity using the following balances for April transactions.
Cash $12,950
Accounts Receivable 2,000
Office Supplies 4,600
Prepaid Insurance 1,200
Accounts Payable $300
Jay Pembroke, Capital 18,000
Jay Pembroke, Drawing (100)
Service Fees 3,300
Rent Expense (750)
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If an amount is zero, enter "0".
Jay Pembroke
Statement of Owner's Equity
For Month Ended April 30, 20xx
Cash Jay Pembroke, capital, April 1, 20xx Jay Pembroke, capital, April 30, 20xx Less withdrawals for April Net income for April
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Increase in capital Investment during April Jay Pembroke, capital, April 30, 20xx Less withdrawals for April Cash
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Total investment
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Increase in capital Investment during April Jay Pembroke, capital, April 1, 20xx Jay Pembroke, capital, April 30, 20xx Net income for April
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Less increase in capital Less investment during April Less Jay Pembroke, capital, April 1, 20xx Less Jay Pembroke, capital, April 30, 20xx Less withdrawals for April
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Increase in capital Decrease in capital
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Increase in capital Investment during April Jay Pembroke, capital, April 1, 20xx Jay Pembroke, capital, April 30, 20xx Less withdrawals for April Net income for April
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Dear Lisa,
I hope this message finds you well. I wanted to take a moment to respond to your fax and address some of the points you raised regarding the bond issuances at Trend Press and Silver Books.
Firstly, it's important to understand that the market's preference for a particular publisher cannot solely be determined by the pricing of bonds or personal salary increases. While these elements might provide some insights, they are not comprehensive indicators of a company's overall success or superiority.
In the case of the bond issuances, it's true that Trend Press issued their bonds at a discount, while Silver Books issued theirs at a premium. However, the pricing of bonds is influenced by various factors, such as the financial condition, credit rating, and market perception of the issuing company.
A bond issued at a discount means that the company is offering the bond at a lower price than its face value. This could be due to a variety of reasons, such as a higher perceived risk associated with the company or the prevailing market interest rates. On the other hand, a bond issued at a premium means that the company is able to offer the bond at a higher price than its face value. This might indicate a lower perceived risk or a strong demand for the company's bonds.
It is important to note that the pricing of bonds is not solely determined by the publishing industry's preference or the quality of the publisher. Market conditions, investor sentiment, and the financial health of the respective companies all play a significant role.
Similarly, salary increases can be influenced by various factors, including individual performances, company policies, market competition for talent, and strategic decisions made by the respective publishers. While a salary increase for you is indeed positive news, it doesn't necessarily prove the superiority of one publisher over the other.
To assess the overall success and superiority of a publishing firm, it is advisable to consider a broader set of factors, such as profitability, market share, customer satisfaction, innovations in the publishing industry, and the long-term sustainability of the business model.
I believe it is essential for us to have a more comprehensive understanding of each other's companies before making any judgments. Let's continue to support and challenge each other as friendly rivals in this industry, always striving for excellence.
Best regards,
Susan