Horngren's Financial & Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780133866292
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Question
Chapter 13, Problem 13.41BP
1.
To determine
Corporation: A business concern where there is a separate legal entity, and are owned by shareholders, are classified as corporation. Transfer of ownership and raising funds are easy in this form of organization. The liabilities of the stockholders to its creditors is limited up to their invested capital amount in the corporation.
To Explain: the main advantages of a corporate form of business.
2.
To determine
To explain: whether to recommend for issuing preferred stock or common stock.
3.
To determine
To Calculate: the number of stocks to be issued by P S Comic Store.
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Organizing a corporation and issuing stock
Montel and Jeremy are opening a paint store. There are no competing paint stores in the area. They must decide how to organize the business. They anticipate profits of $350 000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.
Requirements
What is the main advantage they gain by selecting a corporate form of business now?
Would you recommend they initially issue preferred or common stock? Why?
If they decide to issue $5 par common stock and anticipate an initial market price of $20 per share, how many share will they need to issue to raise $2,750,000?
Scenario:Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steveanticipates generating a massive profit during the first year and that the following years should be relatively profitable.Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as thecompany grows. Steve believes that the corporate form of operation will be his best option and have hired you as aconsultant and seek your advice.
e) Is it true or false that all forms and classes of stock carry voting rights?f) Is it true of false that stock sold for amounts in excess of par value results in a gain reported on the incomestatement?
Scenario:Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steveanticipates generating a massive profit during the first year and that the following years should be relatively profitable.Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as thecompany grows. Steve believes that the corporate form of operation will be his best option and have hired you as aconsultant and seek your advice.
c) Explain the term outstanding stock.d) Is it true or false that corporations muse issue common stock, but may or may not decide to issue preferredstock?
Chapter 13 Solutions
Horngren's Financial & Managerial Accounting (5th Edition)
Ch. 13 - Prob. 1QCCh. 13 - Prob. 2QCCh. 13 - Suppose Value Home and Garden Imports issued...Ch. 13 - Prob. 4QCCh. 13 - Prob. 5QCCh. 13 - Assume that a company paid 6 per share to purchase...Ch. 13 - Prob. 7QCCh. 13 - A small stock dividend a. decreases common stock....Ch. 13 - Jackson Health Foods has 8,000 shares of 2 par...Ch. 13 - Prob. 10QC
Ch. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - How does authorized stock differ from outstanding...Ch. 13 - What are the four basic rights of stockholders?Ch. 13 - How does preferred stock differ from common stock?Ch. 13 - Prob. 6RQCh. 13 - What are the two basic sources of stockholders'...Ch. 13 - Prob. 8RQCh. 13 - If stock is issued for assets other than cash,...Ch. 13 - Prob. 10RQCh. 13 - Where and how is treasury stock reported on the...Ch. 13 - What is the effect on the accounting equation when...Ch. 13 - What are the three relevant dates involving cash...Ch. 13 - How does cumulative preferred stock differ from...Ch. 13 - What is a stock dividend?Ch. 13 - Prob. 16RQCh. 13 - What are some reasons corporations issue stock...Ch. 13 - Prob. 18RQCh. 13 - What does the statement of retained earnings...Ch. 13 - What is a prior-period adjustment?Ch. 13 - Prob. 21RQCh. 13 - What does earnings per share report, and how is it...Ch. 13 - What is the price/earnings ratio, and how is it...Ch. 13 - What does the rate of return on common stock show,...Ch. 13 - Prob. 13.1SECh. 13 - Journalizing issuance of stock- at par and at a...Ch. 13 - Journalizing issuance of stock-no-par Ashford...Ch. 13 - Journalizing issuance of stock- stated value...Ch. 13 - Journalizing issuance o f stock for assets other...Ch. 13 - Prob. 13.6SECh. 13 - Accounting for cash dividends Frenchroast Company...Ch. 13 - Dividing cash dividends between preferred and...Ch. 13 - Prob. 13.9SECh. 13 - Prob. 13.10SECh. 13 - Prob. 13.11SECh. 13 - Preparing a statement of retained earnings Tinder,...Ch. 13 - Analyzing the effect of prior-period adjustments...Ch. 13 - Prob. 13.14SECh. 13 - Prob. 13.15SECh. 13 - Prob. 13.16SECh. 13 - Prob. 13.17ECh. 13 - Prob. 13.18ECh. 13 - Journaling issuance of stock Skylar Systems...Ch. 13 - Prob. 13.20ECh. 13 - Prob. 13.21ECh. 13 - Prob. 13.22ECh. 13 - Journalizing treasury stock transactions and...Ch. 13 - Journalizing issuance of s tock and treasury stock...Ch. 13 - Computing dividends on preferred and common stock...Ch. 13 - Computing dividends on preferred and common stock...Ch. 13 - Journalizing a stock dividend and reporting...Ch. 13 - Prob. 13.28ECh. 13 - Reporting stockholders' equity after a stock split...Ch. 13 - Determining the effects of cash dividends, stock...Ch. 13 - Prob. 13.31ECh. 13 - Prob. 13.32ECh. 13 - Computing earnings per share and price/earnings...Ch. 13 - Computing rate of return on common stockholders'...Ch. 13 - Organizing a corporation and issuing stock John...Ch. 13 - Identifying sources of equity, stock issuance, and...Ch. 13 - Prob. 13.37APCh. 13 - Journalizing dividends and treasury stock...Ch. 13 - Journalizing dividend and treasury stock...Ch. 13 - Prob. 13.40APCh. 13 - Prob. 13.41BPCh. 13 - Prob. 13.42BPCh. 13 - Prob. 13.43BPCh. 13 - Journalizing dividends and treasury stock...Ch. 13 - Journalizing dividend and treasury stock...Ch. 13 - Prob. 13.46BPCh. 13 - Sources of equity and journalizing stock issuance...Ch. 13 - Prob. 13.1CTFSCCh. 13 - Prob. 13.1CTCA
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