Reporting Contingent Liabilities and Stockholders’ Equity

Debt securities such as bonds pay a stated interest rate. This interest rate depends on the risk of investment. In addition, bond prices change when investment risk changes. Standard and Poor’s provide ratings for companies. Stock prices also fluctuate. Fluctuations depend on various factors.

Find an article about a company that has been affected recently by its bond rating or its stock price. Relate the story to what we learned this week about accounting for bonds (liabilities) and stock (stockholders’ equity).

Solution preview

The prices of the bonds rise due to different factors, but primarily they are affected by the interest rates. In the event, the interest rates rise then the prices of the bonds will decrease. This will mean that one can sell the bonds at a higher price more than the buying price and hence one will end up making a profit………….

APA

335 words