Which of the following scenarios does adonated capital arise? *Forgiveness of an existing loan from thegovernmentAn equipment from a manufacturerShares donated by a shareholder to thecorporationFinancial aid from the governmentWhich of the following is true about sharesplit? *It increases the total number of outstandingsharesIt increases the aggregate par value ofsharesIt decreases the retained earnings of thecorporationAll of the above.

Donated Capital. It arises when someone is giving assets, securities or treasury stocks. shares…

Answered: Which of the following scenarios does a…

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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For a corporation, equity capital comes in two forms. What are they?
o raise capital, what are the pros and cons of selling bonds, compared to issuing stock or borrowing money from a bank in terms of raising capital?
Suppose that a new government is elected and it changes the law applying to firms to:• Allow dividend payments to be tax deductible• Stop interest expense on debt from being tax deductibleHolding other factors constant, and assuming that firms seek to maintain an optimal capital structure in accordance with trade-off theory, what would you expect to happen to the debt ratio of a firm with both equity and debt in its capital structure?a. An increase in the debt ratiob. A decrease in the debt ratioc. The debt ratio would be unchangedd. The debt ratio would doublee. None of the above or it is not possible to say
Interpretation No. 46R relates to the issue of whether an investing firm is the primary beneficiary in a variable-interest entity. When is an entity classified as a variable interest entity? Starting with free cash flows from operations, discuss how an analyst would measure free cash flows to common equity shareholders.
How does attracting equity capital easier for a corporation?
Mf4. All of the following are advantages of a stock dividend distribution to shareholders on account as of ex-dividend date except? a. preserves cash balances of the firm to be used for other investment opportunities b. decrease in share price may attract new investors to raise additional capital c. bonus share distribution dilutes the share price d. not treated as a taxable event for investors and shareholders until sold e. none of the above
If a company sells new shares of stock to raise money, this will result in a ____ to the contributed capital accounts. A.Debit B.Credit
When a corporation invests borrowed money in assets that generate profits greater than the after-tax cost of the debt, it increases the return on equity for common shareholders. creates financial leverage. has a mix of debt and equity in its capital structure. does all of these options. If the effective rate of interest is greater than the contract rate, the bonds will sell at par. a premium. a discount. any of these choices, depending on other circumstances.
Which is not a benefit of debt to the corporation?a. interest payments are tax deductibleb. when debt is used heavily, it increases stock valuec. In periods of inflation, debt is paid back with amounts that are worth less than the ones borrowed.d. compared to equity, debts have a lower cost of capitale. answer not given
Is there a type of stock preferable over the other? Should a corporation also utilize borrowing if it is already issuing stock?
Long-term investments that involve the purchase of a significant portion of the stock of another company may be held for a strategic purpose, such as O a. the receipt of dividends O b. the receipt of interest revenue O c. the gains from the increase in market value O d. expansion into new markets
It is often said that the primary obejctive of a corporation is to maximize stockholder wealth. do you agree or disagree with this statement?

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