W17-3 WC Computer Company is a small, closely held corporation. Eighty percent of the stock is held by Derek Yu, president. Of the remainder, 10% is held by members of his family and 10% by Kathy Reyes, a former officer who is now retired. The balance sheet of the company at June 30, 2019, was substantially as shown below. Assets Liabilities and Stockholders' Equity P 22,000 P 50,000 Cash Current Liabilities 450,000 P472,000 Others Capital Stock Retained Earnings 250,000 172,000 P472,000 Additional authorized capital stock of P300,000 par value had never been issued. To strengthen the cash position of the company, Wallace issued capital stock with a par value of P100, 000 to himself at par for cash. At the next stockholders' meeting, Reyes objected and claimed that her interests had been injured. Instructions: (a) Which stockholder's right was ignored in the issue of shares to Derek Yu? (b) How may the damage to Reyes' interests be repaired most simply? (c) If Derek Yu offered Reyes a personal cash settlement and they agreed to employ you as an impartial arbitrator to determine the amount, what settlement would you propose? Present your calculations with sufficient explanation to satisfy both parties.

W17-3 WC Computer Company is a small, closely held corporation. Eighty percent of the stock is held by Derek Yu, president. Of the remainder, 10% is held by members of his family and 10% by Kathy Reyes, a former officer who is now retired. The balance sheet of the company at June 30, 2019, was substantially as shown below. Assets Liabilities and Stockholders' Equity P 22,000 P 50,000 Cash Current Liabilities 450,000 P472,000 Others Capital Stock Retained Earnings 250,000 172,000 P472,000 Additional authorized capital stock of P300,000 par value had never been issued. To strengthen the cash position of the company, Wallace issued capital stock with a par value of P100, 000 to himself at par for cash. At the next stockholders' meeting, Reyes objected and claimed that her interests had been injured. Instructions: (a) Which stockholder's right was ignored in the issue of shares to Derek Yu? (b) How may the damage to Reyes' interests be repaired most simply? (c) If Derek Yu offered Reyes a personal cash settlement and they agreed to employ you as an impartial arbitrator to determine the amount, what settlement would you propose? Present your calculations with sufficient explanation to satisfy both parties.

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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