Question 1:

Pleasant Co. is considering issuing bonds for the expansion of its business overseas. Is it more advantageous for Pleasant Co. to offer customers the option to purchase additional service contracts or to provide warranties on all products sold considering its upcoming bond issuance?

Suggested approach to answer this question:

1. Write out the journal entries for Assurance-typed warranties and Service-typed warranties and think of the balance sheet impact of each.
2. Think about how the balance sheet impact would impact the selling price of bonds. Remember that investors look at liquidity ratios when determining the risk of a bond issuance