1) Michael Smith, your uncle, is an inventor who has decided to incorporate. Uncle Michael knows that you are an accounting major at U.N.O. In a recent letter to you, he ends with the question, “I’m filling out a state incorporation application. Can you tell me the difference among the following terms: (1) authorized stock, (2) issued stock, (3) outstanding stock, and (4) preferred stock?”

In a brief note, differentiate for Uncle Michael the four different stock terms. Write the letter to be friendly, yet professional.

2) Rudolph, president of Ap, Inc., is considering the issuance of bonds to finance an expansion of his business. He has asked you to do the following: (1) discuss the advantages of bonds over common stock financing, (2) indicate the types of bonds he might issue, and (3) explain the issuing procedures used in bond transactions.

Write a memorandum to the president, answering his request.