Accounting, Chapters 14-26
27th Edition
ISBN: 9781337514095
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Question
Chapter 13, Problem 13.2CP
To determine
Authorized stock: It refers to the maximum number of shares preferred or common shares allowed by the state charter to be issued by the company.
To discuss: Whether Person L is behaving in a professional manner.
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Lou Hoskins and Shirley Crothers are organizing Red Lodge Metals Unlimited Inc. to undertake a high-
risk gold-mining venture in Canada. Lou and Shirley tentatively plan to request authorization for
400,000,000 shares of common stock to be sold to the general public. Lou and Shirley have decided to
establish par of $0.03 per share in order to appeal to a wide variety of potential investors. Lou and
Shirley feel that investors would be more willing to invest in the company if they received a large
quantity of shares for what might appear to be a "bargain" price.
Discuss whether Lou and Shirley are behaving in a professional manner.
Happy Harry Hoskins and Crabby Cynthia Crowders are organizing Red Lodge Metals Unlimited, Inc., to undertake a high risk gold mining venture in Canada. Mr. Hoskins and Ms.
Crowders tentatively plan to request authorization for 400,000,000 shares of common stock to be sold to the general public.
Mr. Hoskins and Ms. Crowders have decided to establish par value at $0.03 per share in order to appeal to a wide variety of potential investors. They believe that investors
would be more willing to invest in a company if investors received a large quantity of shares for what might appear to be a "bargain" price.
Discussion:
Are Mr. Hoskins and Ms. Crowders acting ethically? Please discuss.
An investment bank agrees to underwrite an issue of 15 million shares of stock for Looney Landscaping Corporation.
a. The investment bank underwrites the stock on a firm commitment basis, and agrees to pay $10.00 per share to Looney
Landscaping Corporation for the 15 million shares of stock. The investment bank then sells those shares to the public for $11.50
per share. How much money does Looney Landscaping Corporation receive? What is the profit to the investment bank? If the
investment bank can sell the shares for only $8.50, how much money does Looney Landscaping Corporation receive? What is
the profit to the investment bank?
b. Suppose, instead, that the investment bank agrees to underwrite the 15 million shares on a best efforts basis. The investment
bank is able to sell 13.5 million shares for $10.00 per share, and it charges Looney Landscaping Corporation $0.325 per share
sold. How much money does Looney Landscaping Corporation receive? What is the profit to the investment…
Chapter 13 Solutions
Accounting, Chapters 14-26
Ch. 13 - Of two corporations organized at approximately the...Ch. 13 - Prob. 2DQCh. 13 - A corporation with both preferred stock and common...Ch. 13 - An owner of 2,500 shares of Simmons Company common...Ch. 13 - Prob. 5DQCh. 13 - What is the primary purpose of a stock split?Ch. 13 - Prob. 7DQCh. 13 - The treasury stock in Discussion Question 7 is...Ch. 13 - What are the three classifications of restrictions...Ch. 13 - Indicate how prior period adjustments should he...
Ch. 13 - A Dividends per share Reinhardt Furniture Company...Ch. 13 - Dividends per share Zero Calories Company has...Ch. 13 - Entries for issuing stock On May 23, Stoltz Realty...Ch. 13 - Entries for issuing stock On January 22, Zentric...Ch. 13 - Prob. 13.3APECh. 13 - Entries for cash dividends The declaration,...Ch. 13 - Prob. 13.4APECh. 13 - Entries for stock dividends Antique Buggy...Ch. 13 - Prob. 13.5APECh. 13 - Entries for treasury stock On May 27, Hydro...Ch. 13 - Reporting stockholders' equity Using the following...Ch. 13 - Reporting stockholders' equity Using the following...Ch. 13 - Retained earnings statement Rockwell Inc. reported...Ch. 13 - Retained earnings statement None Cruises Inc....Ch. 13 - Earnings per share Financial statement data for...Ch. 13 - Earnings per share Financial statement data for...Ch. 13 - Dividends per share Imaging Inc., a developer of...Ch. 13 - Dividends per share Lightfoot Inc., a software...Ch. 13 - Prob. 13.3EXCh. 13 - Prob. 13.4EXCh. 13 - Issuing stock for assets other than cash On April...Ch. 13 - Prob. 13.6EXCh. 13 - Issuing stock Willow Creek Nursery, with an...Ch. 13 - Issuing stock Work Place Products Inc., a...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Prob. 13.10EXCh. 13 - Prob. 13.11EXCh. 13 - Prob. 13.12EXCh. 13 - Prob. 13.13EXCh. 13 - Prob. 13.14EXCh. 13 - Treasury stock transactions Lawn Spray Inc....Ch. 13 - Prob. 13.16EXCh. 13 - Reporting paid-in capital The following accounts...Ch. 13 - Stockholders' Equity section of balance sheet The...Ch. 13 - Prob. 13.19EXCh. 13 - Retained earnings statement Sumter Pumps...Ch. 13 - Prob. 13.21EXCh. 13 - Statement of stockholders' equity The...Ch. 13 - EPS Junkyard Am, Inc., had earnings of 516,000 for...Ch. 13 - Prob. 13.24EXCh. 13 - EPS Caterpillar Inc. and Deere Company are two...Ch. 13 - Prob. 13.1APRCh. 13 - Prob. 13.2APRCh. 13 - Selected stock transactions The following selected...Ch. 13 - Entries for selected corporate transactions Morrow...Ch. 13 - Entries for selected corporate transactions...Ch. 13 - Prob. 13.1BPRCh. 13 - Stock transaction for corporate expansion Pulsar...Ch. 13 - Selected stock transactions Diamondback Welding ...Ch. 13 - Entries for selected corporate transactions Nav-Go...Ch. 13 - Entries for selected corporate transactions West...Ch. 13 - Prob. 13.1CPCh. 13 - Prob. 13.2CPCh. 13 - Communication Motion Designs Inc. has paid...Ch. 13 - Prob. 13.5CPCh. 13 - Prob. 13.6CP
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