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Chapter 13: Q22E_2 (page 712)
Eates Corp. issued 8,000 shares of no-par common stock for $13 per share.
Requirements
2. Which type of stock results in more total paid-in capital?
The common stock for $3 per share has more paid-in capital.
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Reporting earnings per share
Return to the ABC data in Short Exercise S13-12. ABC had 8,000 shares of common stock outstanding during 2018. ABC declared and paid preferred dividends of $4,000 during 2018.
Show how ABC reports EPS data on its 2018 income statement.
Question: Organizing a corporation and issuing stock
Jimmy and Randy are opening a comic store. There are no competing comic stores in the area. They must decide how to organize the business. They anticipate profits of \(550,000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.
Requirements
3. If they decide to issue \)3 par common stock and anticipate an initial market price of \(75 per share, how many shares will they need to issue to raise \)3,000,000?
Question - Describing corporation characteristics
Due to recent beef recalls, Southwest Steakhouse is considering incorporating. Bob, the owner, wants to protect his personal assets in the event the restaurant is sued.
Requirements
2. What are some disadvantages of organizing as a corporation?
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
2. Prepare a retained earnings statement for the year ended December 31, 2018. Assume Goldstein鈥檚 net income for the year was $90,000.
What is the price/earnings ratio, and how is it calculated?
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