Question

1. Please compare and contrast the following:

A. the normal sale of inventory transaction with the sale of inventory and collection of sales tax.

B. the working capital and current ratios with debt-to-asset ratio & accounts receivable turnover ratio

C.  characteristics of a long-term note payable with those of a bond payable.'

D. interest expense for a long-term note payable with that of a bond payable.

E. issuing a bond at a discount from issuing a bond at a premium.

Answer 1

A. Difference between the normal sale of inventory and sale of inventory and collection of tax :

1. sale of inventory means when after manufacturing our goods are ready in the form of finished goods to make available to customers while after selling there is a collection of tax from the customer that is an indirect tax.

B. Difference between working capital and current ratio with debt to asset ratio and account receivable turnover ratio:

1. current ratio is the proportion of the number of current assets divided by current liabilities while working capital is the subtraction of current liabilities from the current assets.

2. accounts receivable turnover ratio is an accounting measure used to quantify a company's effectiveness in collecting its receivable or money owned y its clients while debt to asset ratio tells the percentage of company's total assets that was financed by creditors.

C. Difference between long term notes payable and bond payable :

1. Notes payable involve business borrowing money from a single creditor only while bonds issue includes a large no. of bonds usually in denominations that are sold to many different lenders.

2. bonds are always considered and regulated as securities while notes payable are not considered securities.

D. Difference between interest expense on notes payable and bond payable :

1. there is not so much difference between them. the interest of notes payable may be fixed or different but interest on bonds payable is fixed.

E. Difference between issue bond at discount and premium:

1. when the price of the bond is more than face value then it means it issued on premium and if the price is less than face value then on discount.

2. bond with higher current interest rate sell a premium while those interest rates below prevailing rates sell at discount.

please give the feedback and rate the answer.