Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend. Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock. Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock. Issue of common stock for non-cash assets or services: Corporations often issue common stock for the services received from attorneys or consultants as compensation, or for the purchase of non-cash assets such as land, buildings, or equipment. To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for a total cash of $52,000.

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Answer 1

Question

Chapter 11, Problem 11.4E

(a)

To determine

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock.

Issue of common stock for non-cash assets or services: Corporations often issue common stock for the services received from attorneys or consultants as compensation, or for the purchase of non-cash assets such as land, buildings, or equipment.

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for a total cash of $52,000.

(b)

To determine

To Journalize: The transaction, assume that the common stock has a stated value of $5 per share and was issued for a total cash of $52,000.

(c)

To determine

To Journalize: The transaction, assume that the common stock has no stated value or par value and was issued for a total cash of $52,000.

(d)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for service rendered by the attorney during incorporation been valued at $52,000.

(e)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for land worth $52,000

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Mercury Corp. has no debt outstanding and a total market value of $350,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 22% higher. If there is a recession, then EBIT will be 28% lower. The company is considering a $180,000 debt issue with an interest rate of 7%. The proceeds will be used to repurchase shares of stock. There are currently 9,000 shares outstanding. Ignore taxes for questions a) and b). Assume the company has a market-to-book ratio of 1.0 and the stock price remains constant. Required: Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued.

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Answer 2

Question

Chapter 11, Problem 11.4E

(a)

To determine

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock.

Issue of common stock for non-cash assets or services: Corporations often issue common stock for the services received from attorneys or consultants as compensation, or for the purchase of non-cash assets such as land, buildings, or equipment.

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for a total cash of $52,000.

(b)

To determine

To Journalize: The transaction, assume that the common stock has a stated value of $5 per share and was issued for a total cash of $52,000.

(c)

To determine

To Journalize: The transaction, assume that the common stock has no stated value or par value and was issued for a total cash of $52,000.

(d)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for service rendered by the attorney during incorporation been valued at $52,000.

(e)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for land worth $52,000

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Answer 3

Question

Chapter 11, Problem 11.4E

(a)

To determine

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock.

Issue of common stock for non-cash assets or services: Corporations often issue common stock for the services received from attorneys or consultants as compensation, or for the purchase of non-cash assets such as land, buildings, or equipment.

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for a total cash of $52,000.

(b)

To determine

To Journalize: The transaction, assume that the common stock has a stated value of $5 per share and was issued for a total cash of $52,000.

(c)

To determine

To Journalize: The transaction, assume that the common stock has no stated value or par value and was issued for a total cash of $52,000.

(d)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for service rendered by the attorney during incorporation been valued at $52,000.

(e)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for land worth $52,000

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Answer 4

Question

Chapter 11, Problem 11.4E

(a)

To determine

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock.

Issue of common stock for non-cash assets or services: Corporations often issue common stock for the services received from attorneys or consultants as compensation, or for the purchase of non-cash assets such as land, buildings, or equipment.

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for a total cash of $52,000.

(b)

To determine

To Journalize: The transaction, assume that the common stock has a stated value of $5 per share and was issued for a total cash of $52,000.

(c)

To determine

To Journalize: The transaction, assume that the common stock has no stated value or par value and was issued for a total cash of $52,000.

(d)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for service rendered by the attorney during incorporation been valued at $52,000.

(e)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for land worth $52,000

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Answer 5

Chapter 11, Problem 11.4E

(a)

To determine

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock.

Issue of common stock for non-cash assets or services: Corporations often issue common stock for the services received from attorneys or consultants as compensation, or for the purchase of non-cash assets such as land, buildings, or equipment.

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for a total cash of $52,000.

(b)

To determine

To Journalize: The transaction, assume that the common stock has a stated value of $5 per share and was issued for a total cash of $52,000.

(c)

To determine

To Journalize: The transaction, assume that the common stock has no stated value or par value and was issued for a total cash of $52,000.

(d)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for service rendered by the attorney during incorporation been valued at $52,000.

(e)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for land worth $52,000

Answer 6

Chapter 11, Problem 11.4E

(a)

To determine

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock.

Issue of common stock for non-cash assets or services: Corporations often issue common stock for the services received from attorneys or consultants as compensation, or for the purchase of non-cash assets such as land, buildings, or equipment.

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for a total cash of $52,000.

Answer 7

Chapter 11, Problem 11.4E

(a)

To determine

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock.

Issue of common stock for non-cash assets or services: Corporations often issue common stock for the services received from attorneys or consultants as compensation, or for the purchase of non-cash assets such as land, buildings, or equipment.

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for a total cash of $52,000.

Answer 8

(b)

To determine

To Journalize: The transaction, assume that the common stock has a stated value of $5 per share and was issued for a total cash of $52,000.

Answer 9

(b)

To determine

To Journalize: The transaction, assume that the common stock has a stated value of $5 per share and was issued for a total cash of $52,000.

Answer 10

(c)

To determine

To Journalize: The transaction, assume that the common stock has no stated value or par value and was issued for a total cash of $52,000.

Answer 11

(c)

To determine

To Journalize: The transaction, assume that the common stock has no stated value or par value and was issued for a total cash of $52,000.

Answer 12

(d)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for service rendered by the attorney during incorporation been valued at $52,000.

Answer 13

(d)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for service rendered by the attorney during incorporation been valued at $52,000.

Answer 14

(e)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for land worth $52,000

Answer 15

(e)

To determine

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for land worth $52,000

Answer 16

Expert Solution & Answer

Answer 17

Expert Solution & Answer

Answer 18

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Answer 19

Ch. 11 - Prob. 1Q Ch. 11 - Prob. 2Q Ch. 11 - Prob. 3Q Ch. 11 - Prob. 4Q Ch. 11 - Prob. 5Q Ch. 11 - Prob. 6Q Ch. 11 - Prob. 7Q Ch. 11 - Prob. 8Q Ch. 11 - Prob. 9Q Ch. 11 - Prob. 10Q

To Journalize: The transaction, assume that the common stock has a stated value of $5 per share and was issued for a total cash of $52,000.

To Journalize: The transaction, assume that the common stock has no stated value or par value and was issued for a total cash of $52,000.

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for service rendered by the attorney during incorporation been valued at $52,000.

To Journalize: The transaction, assume that the common stock has a par value of $5 per share and was issued for land worth $52,000

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Chapter 11 Solutions