Understanding Owners’ Equity Jope Company and Zent Corporation have identical assets, but different approaches in the way in which they have financed their assets.

Summarized balance sheets are as follows:

a. What is the advantage to Jope’s bondholders of having a majority of its assets financed through owners’ equity?

b. What is the advantage to Jope’s common shareholders of having a majority of its assets financed through owners’
equity?

c. What is the advantage to Zent’s common shareholders of having a greater portion of its assets financed through bonds?

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Cash Accounts receivable Buildings and equipment (net) Total assets Accounts payable Jope $ 200,000 500,000 1,400,000 $2,100,000 Zent $ 200,000 500,000 1,400,000 $2,100,000 $ 80,000 $ 450,000 Wages payable Bonds payable Common stock Retained earnings Total liabilities and owners' equity 120,000 150,000 200,000 1,000,000 350,000 150,000 1,350,000 350,000 $2,100,000 $2,100,000