Maritime Corp. is a junior mining company listed on the TSX. The common share price of Maritime fluctuates in value. Recent swingswent from a high of $12 to a low of $0.40. Maritime issued stock options on 1 September 20X5 to a consultant, in exchange for aproject completed over the last year. The consultant estimated her time was worth $31,000, but the company estimated that it couldhave had the necessary work done for about $25,000 cash. The options specified that 5,000 common shares could be bought for$0.30 per share at any time over the next 10 years. The market price of common shares was $2.00 on the day the options wereissued. At the same time options were issued to the consultant, identical options were issued to the company lawyer for work done todate. An option pricing model valued each set of stock options at $28,000.Required:1. Provide journal entries to record issuance of the two sets of options. (If no entry is required for a transaction/event, select "Nojournal entry required" in the first account field.)Journal entry worksheet<1 2Record the entry for granting stock rights towards Consulting expense.Note: Enter debits before credits.Transaction1Journal entry worksheet< 1 2General JournalRecord the entry for granting stock rights towards legal expense.Note: Enter debits before credits.Transaction2General JournalDebit CreditDebit Credit> 2. Assume that two years after issuance, when the market price of the shares was $10, the consultant exercised her options. Providethe appropriate entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)View transaction listJournal entry worksheet1Record the entry for exercising the stock rights.Note: Enter debits before credits.Transaction1View transaction listGeneral Journal3. Assume that 10 years after issuance, when the market price of the shares was $0.10, the lawyer's options expired. Provide the entry,if any. (If no entry is required for a transaction/event, select " o journal entry required" in the first account field.)Journal entry worksheet< 1Record the entry for the expiration of stock rights.Note: Enter debits before credits.Transaction1Debit CreditGeneral Journal>Debit Credit

Journal entry: - Entries recorded in the journal book are known as journal entries. Journal is the…

Answered: Maritime Corp. is a junior mining…

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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Meman
Supercool Inc is currently an unlevered firm with 1,000 shares outstanding. It expects to generate $1,600 in EBIT in perpetuity. The tax rate is 45%. All earnings after tax are paid out as dividends. The firm is considering a capital restructuring for which the company will issue $3,000 of debt to buy back shares. Its cost of debt is 10%. Unlevered firms in the same industry have a cost of equity of 20%. The capital restructuring is going to take place in one month after its announcement. What is the share price of Supercool in the day before and after the restructuring completion? Before: $4.4; After $4.4 Before: $5.75; After $4.4 Before: $4.4; After $5.75 Before: $5.75; After $5.75
Pelican Oil is a publicly traded oil and gas company specializing in global exploration and offshore drilling. Even though Pelican has been operating for almost 30 years, it is still considered a "newcomer" in the industry. The key leaders in the industry are large conglomerates that have been operating for over 100 years. Over the last 18 months, the global supply of oil has exceeded the demand, resulting in a significant drop in oil prices. A drop in oil prices means decreased revenue for oil and gas companies of all sizes. For smaller companies in the industry like Pelican, significant drops in oil prices are harder to withstand. (The larger conglomerates are so well diversified that they have an easier time withstanding fluctuations in the oil market.) In response to the drop in oil prices and decreased demand, Pelican has temporarily suspended drilling operations and laid off employees in the field and in the corporate office. You are preparing for the upcoming audit of Pelican.…
Supercool Inc is currently an unlevered firm with 1,000 outstanding shares. It expects togenerate $1,600 in EBIT in perpetuity. The tax rate is 35%. All earnings after tax are paid outas dividends. The firm is considering a capital restructuring for which the company will issue$3,000 of debt to buy back shares. Its cost of debt is 10%. Unlevered firms in the sameindustry have a cost of equity of 20%. The capital restructuring is going to take place onemonth after its announcement. What is the share price of Supercool on the day before andafter the restructuring completion?
Zee Manufacturing’s value of operations is equal to $1,800 million after a recapitalization (the firm had $ 200 million debt before the recap). Zee raised additional $400 million in new debt and used this to buy back the stocks. Zee had no short-term investments before or after the recap. After the recap, wd = 0.35. The firm had 60 million shares before the recap. What is the stock price after the recap?
Hanuman Corp is a medium-sized corporation that has long dominated their market. With a strong cash-flow position, they have decided to invest excess cash strategically. In particular, Hanuman made periodic investments with their main supplier, Shiva. Although Hanuman currently owns 18% of the common shares of Shiva, it does have significant influence over the operations of this investee company. Hanuman Corp has a December 31st year end. Before 2020, Hanuman had invested $22.4 million in Shiva and, at December 31, 2019, the investment had a fair value of $21.3 million. Hanuman did not sell or purchase any Shiva shares this year. Hanuman declared and paid a dividend totalling $2.2 million on all its common shares and reported 2020 net income of $13.6 million. Hanuman’s 18% ownership of Shiva has a December 31, 2020, fair value of $21,405,000. Required: Prepare the appropriate entries for the Shiva investment, for 2020
Vijay
Nicholls Enterprises Pty Ltd has been selling software supplies for the past 20 years. The company’s product line has seen very little change in the past 5 years, and the company does not expect to add any new items for the foreseeable future. Last year, the company paid a dividend of $4.45 to its ordinary shareholders. The company is not expected to grow its revenues for the next several years. If your required rate of return for such companies is 13 per cent, what is the current value of this company’s shares?
After unexpectedly hosting an event for an out-of-favour political candidate, Four Seasons Total Landscaping expects to see its profits steadily decline each year going forward. Having recently paid its annual dividend of $$21.2521.25 per share, shares of Four Seasons Total Landscaping currently trade at a market price of $$77.0277.02 each. After analysing its business, you determine that the appropriate cost of equity capital for the firm is 18.118.1% per annum due to relatively high levels of fixed costs and debt financing. Based on the above information, at what rate per annum does the market seem to believe that the dividends of Four Seasons Total Landscaping will decrease? The annual dividends are expected to decline in size by % per annum.(Round to FOUR decimal places)
Roybus, Inc., a manufacturer of flash memory, just reported that its main production facility in Taiwan was destroyed in a fire. Although the plant was fully insured, the loss of production will decrease Roybus's free cash flow by $181 million at the end of this year and by $63 million at the end of next year. a. If Roybus has 32 million shares outstanding and a weighted average cost of capital of 13.8%, what change in Roybus's stock price would you expect upon this announcement? (Assume that the value of Roybus's debt is not affected by the event.) b. Would you expect to be able to sell Roybus stock on hearing this announcement and make a profit? Explain.

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