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Chapter 13: 3RQ (page 707)
How does authorized stock differ from ouststanding stock?
The number of stocks that a corpoartion is legally permitted to issue are authorized stocks. Outstanding stocks are the stocks that are alredy been issued.
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Organizing a corporation and issuing stock
Montel and Jeremy are opening a paint store. There are no competing paint stores in the area. They must decide how to organize the business. They anticipate profits of \(350,000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.
Requirements
3. If they decide to issue \)5 par common stock and anticipate an initial market price of \(20 per share, how many shares will they need to issue to raise \)2,750,000?
Journalizing issuance of stock and preparing the stockholders鈥� equity section of the balance sheet
The charter of Evergreen Corporation authorizes the issuance of 900 shares of preferred stock and 1,400 shares of common stock. During a two-month period, Evergreen completed these stock-issuance transactions:
Mar. 23 Issued 230 shares of \(3 par value common stock for cash of \)15 per share.
Apr. 12 Received inventory with a market value of \(27,000 and equipment with a market value of \)19,000 for 320 shares of the \(3 par value common stock.
17 Issued 900 shares of 5%, \)20 par value preferred stock for \(20 per share.
Requirements
2. Prepare the stockholders鈥� equity section of the Evergreen balance sheet as of April 30, 2018, for the transactions given in this exercise. Retained Earnings has a balance of \)73,000 at April 30, 2018
Match the accounting terminology to the definitions.
1. Factoring receivables a. A monetary claim against a business or an individual.
2. Debtor b. The party to a transaction who takes on an obligation/payable.
3. Accounts receivable c. Using receivables as security (collateral) for a loan.
4. Maturity date d. The right to receive cash in the future from customers for goods sold or for services provided.
5. Receivable e. The date when a note is due.
6. Pledging receivables f. Selling receivables to a finance company or bank.
Journalizing dividend and treasury stock transactions, preparing a statement of retained earnings, and preparing stockholders鈥� equity
The balance sheet of Goldstein Management Consulting, Inc. at December 31, 2017, reported the following stockholders鈥� equity:
Common Stock鈥擻(10 Par Value; 350,000 shares
authorized, 32,000 shares issued and outstanding
Paid-In Capital:
160,000
\) 320,000
650,000
Retained Earnings
Total Stockholders鈥� Equity \( 810,000
Stockholders鈥� Equity
Paid-In Capital in Excess of Par鈥擟ommon 330,000
Total Paid-In Capital
During 2018, Goldstein completed the following selected transactions:
Feb. 6 Declared a 15% stock dividend on common stock. The market value of
Goldstein鈥檚 stock was \)25 per share.
15 Distributed the stock dividend.
Jul. 29 Purchased 2,300 shares of treasury stock at \(25 per share.
Nov. 27 Declared a \)0.10 per share cash dividend on the common stock outstanding.
Requirements
3. Prepare the stockholders鈥� equity section of the balance sheet at December 31, 2018.
Question: Copperhead Trust has the following classes of stock:
Preferred Stock鈥�6%, \(12 par value; 8,500 shares authorized, 7,000 shares issued and outstanding
Common Stock鈥擻)0.10 par value; 2,100,000 shares authorized, 1,400,000 shares issued and outstanding
Requirements
2. Assume the preferred stock is cumulative and Copperhead passed the preferred dividend in 2016 and 2017. In 2018, the company declares cash dividends of $46,000. How much of the dividend goes to preferred stockholders? How much goes to common stockholders?
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