1. At the Beginning of Year 1 Peter and Paul want to establish a new business in the form of a limited company. They both agree that each of them will buy 5,000 shares for a nominal value of € 10.00 each. Required a) Show the balance sheet of the new business after the transaction. b) What part of the business does Paul own (in %) and what is the value of his stake? c) What part of the business does Peter own (in %) and what is the value of his stake? 2. During Year 1 During the next year the following transactions took place: • Purchased inventories for sales € 50,000.00 (30% on credit, 70% on cash) • Sold inventories for € 90,000.00 (50% on credit) • Cost of sales was € 30,000.00 • Drawings or payment for dividends € 0.00 Required a) Show the income statement and the balance sheet for the business at the end of the year. b) What part of the business does Paul own (in %) and what is the value of his stake? c) What part of the business does Peter own (in %) and what is the value of his stake? 3. Beginning of Year 2 At the beginning of the next year Peter and Paul decided that they want to buy a new machine. Therefore, they need another € 160,000.00. Peter and Paul want to issue the necessary number of new shares and sell it to Sarah. They are willing to reduce their % of ownership. Still they don't want to lose money/value in this case. Required a) How many shares do they have to issue if the nominal value should remain € 10.00? b) What is the selling price per share in this case? c) Prepare the balance sheet after this transaction. d) What part of the business does Paul own (in %) and what is the value of his stake? e) What part of the business does Peter own (in %) and what is the value of his stake? f) What part of the business does Sarah own (in %) and what is the value of her stake?
1. At the Beginning of Year 1 Peter and Paul want to establish a new business in the form of a limited company. They both agree that each of them will buy 5,000 shares for a nominal value of € 10.00 each. Required a) Show the balance sheet of the new business after the transaction. b) What part of the business does Paul own (in %) and what is the value of his stake? c) What part of the business does Peter own (in %) and what is the value of his stake? 2. During Year 1 During the next year the following transactions took place: • Purchased inventories for sales € 50,000.00 (30% on credit, 70% on cash) • Sold inventories for € 90,000.00 (50% on credit) • Cost of sales was € 30,000.00 • Drawings or payment for dividends € 0.00 Required a) Show the income statement and the balance sheet for the business at the end of the year. b) What part of the business does Paul own (in %) and what is the value of his stake? c) What part of the business does Peter own (in %) and what is the value of his stake? 3. Beginning of Year 2 At the beginning of the next year Peter and Paul decided that they want to buy a new machine. Therefore, they need another € 160,000.00. Peter and Paul want to issue the necessary number of new shares and sell it to Sarah. They are willing to reduce their % of ownership. Still they don't want to lose money/value in this case. Required a) How many shares do they have to issue if the nominal value should remain € 10.00? b) What is the selling price per share in this case? c) Prepare the balance sheet after this transaction. d) What part of the business does Paul own (in %) and what is the value of his stake? e) What part of the business does Peter own (in %) and what is the value of his stake? f) What part of the business does Sarah own (in %) and what is the value of her stake?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
Transcribed Image Text:1. At the Beginning of Year 1
Peter and Paul want to establish a new business in the form of a limited company. They both
agree that each of them will buy 5,000 shares for a nominal value of € 10.00 each.
Required
a) Show the balance sheet of the new business after the transaction.
b) What part of the business does Paul own (in %) and what is the value of his stake?
c) What part of the business does Peter own (in %) and what is the value of his stake?
2. During Year 1
During the next year the following transactions took place:
• Purchased inventories for sales € 50,000.00 (30% on credit, 70% on cash)
• Sold inventories for € 90,000.00 (50% on credit)
• Cost of sales was € 30,000.00
• Drawings or payment for dividends € 0.00
Required
a) Show the income statement and the balance sheet for the business at the end of the
year.
b) What part of the business does Paul own (in %) and what is the value of his stake?
c) What part of the business does Peter own (in %) and what is the value of his stake?
3. Beginning of Year 2
At the beginning of the next year Peter and Paul decided that they want to buy a new
machine. Therefore, they need another € 160,000.00. Peter and Paul want to issue the
necessary number of new shares and sell it to Sarah. They are willing to reduce their % of
ownership. Still they don't want to lose money/value in this case.
Required
a) How many shares do they have to issue if the nominal value should remain € 10.00?
b) What is the selling price per share in this case?
c) Prepare the balance sheet after this transaction.
d) What part of the business does Paul own (in %) and what is the value of his stake?
e) What part of the business does Peter own (in %) and what is the value of his stake?
f) What part of the business does Sarah own (in %) and what is the value of her stake?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education