Answered: How much will each group of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

HighTech Inc. was a small company started by four entrepreneurs a few years ago. They each initially invested $160,000 and sold $1,000,000 in preferred shares to a wealthy private investor. The company did not earn much profit during its operations but was able to pay the promised annual dividend of $110,000 on the preferred shares. The company did successfully develop several patents, some of which it sold and some it still holds. The four shareholders are planning to sell the remaining patents and all other assets and wind up the company to allow them to move on to other ventures. A summary of the company’s statement of financial position is as follows:

HIGHTECH INC.
Statement of Financial Position
as at April 30, 2020
Total assets
$1,943,000
Total liabilities
75,000
Preferred shares
1,000,000
Common shares
640,000
Retained earnings
228,000
Total liabilities and equity
$1,943,000
(a)
Your answer is incorrect.
How much will each group of shareholders receive on the windup if HighTech is able to sell its assets for:
i. $1,943,000?
ii. $4,844,000?
iii. $1,629,000?
(i)
$1,943,000
(ii)
$4,844,000
(iii)
$1,629,000
If assets sold for
Preferred shareholders'
entitlement
2$
Common shareholders' entitlement
$
2$

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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