Chapter 13, Problem P13.42BPGB

To determine

1)

Introduction:

Classes of shares:

• Shares provide partial ownership or a “share” of a corporation. There are two primary classes of shares – Equity Shares and Preference Shares.

• Equity shares are the class of shares which carry voting rights and equity share holders are the true owners of the company as in the event of dissolution, equity shareholders get last preference in clearing the amounts invested and there is no guarantee of profits / dividend on an annual basis.

• Preference shares are the class of shares which do not carry voting rights and in the event of dissolution, preference shareholders get first preference in clearing the amounts invested and there is usually guarantee of profits / dividend on an annual basis.Convertible Preference shares are preference shares that carry the option to be converted into equity shares after certain duration.

Which classes of shares are outstanding

To determine

2)

Introduction:

Calculation of Par value of Shares

• Shares provide partial ownership or a “share” of a corporation. There are two primary classes of shares – Equity Shares and Preference Shares.

• Preference shares are the class of shares which do not carry voting rights and in the event of dissolution, preference shareholders get first preference in clearing the amounts invested and there is usually guarantee of profits / dividend on an annual basis.Convertible Preference shares are preference shares that carry the option to be converted into equity shares after certain duration.

• Par value of shares refers to the face value or book value of the shares issued. The difference between issue price and par value is the discount or premium on shares.

$\text{Par Value of Shares = Paid in Capital / Number of Shares outstanding}$

To Calculate:

Par Value of Preferred Shares

To determine

3)

Introduction:

Journal Entries

• Journal entries are the first step in recording financial transactions and preparation of financial statements.

• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.

• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.

To Prepare:

Summary Journal entries to record issuance of all stock.

To determine

4)

Introduction:

Journal Entries

• Journal entries are the first step in recording financial transactions and preparation of financial statements.

• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.

• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.

To Prepare:

Journal Entries for Issuance and payment of Dividend