Corporation declared, but had not yet paid, dividends on the 10,000 shares of 6%, $10 par value cumulative preferred stock it had outstanding for the year. The weighted average number of common shares outstanding and net income for the year were 50,000 shares and $90,000, respectively. Earnings per share equals: Answer: Hallery Corporation issued 600 shares of 10% $15 par convertible preferred stock for $12,000. The entry to record the declaration of the annual cash dividend is: 1. debit Cash Dividends
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shareholders. These two sources are reported as (1) paid-in capital and (2) retained earnings. Assets minus Liabilities equals Shareholders' Equity. The primary source of paid-in capital is the investment made by shareholders when buying preferred and common stock. Several other events also affect paid-in capital. Retained earnings represents earned capital. Accumulated Other Comprehensive Income • LO18–2 Comprehensive income includes net income as well as other gains, losses, and other adjustments
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capital. The primary disadvantages are double taxation of earnings and greater governmental regulation. LO 2 Distinguish between publicly owned and closely held corporations. The stock of publicly owned corporations is available for purchase by the general public, usually on an organized stock exchange. Stock in a closely held corporation, in contrast, is not available to the public. Publicly owned corporations tend to be so large that individual stockholders seldom control the corporation;
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1. (TCO A) On July 1, 2010, an interest payment date, $60,000 of Parks Co. bonds were converted into 1,200 shares of Parks Co. common stock, each having a par value of $45 and a market value of $54. There is $2,400 unamortized discount on the bonds. Using the book value method, Parks would record (Points : 4) | no change in paid-in capital in excess of par. a $3,600 increase in paid-in capital in excess of par. a $7,200 increase in paid-in capital in excess of par.
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Chapter 7 Stock Valuation Solution to Problems P7-1. LG 2: Authorized and Available Shares Basic Maximum shares available for sale Authorized shares 2,000,000 Less: Shares outstanding 1,400,000 Available shares 600,000 $48,000,000 = 800,000 shares (b) Total shares needed = $60 The firm requires an additional 200,000 authorized shares to raise the necessary funds at $60 per share. (c) Aspin must amend its corporate charter to authorize the issuance of additional shares. (a) P7-2. LG 2:
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after-tax cost of debt? rd(1 - T) = 0.08(0.65) = 5.2%. 4. Burnwood Tech plans to issue some $60 par preferred stock with a 6% dividend.The stock is selling on the market for $70.00, and Burnwood must pay flotation costs of 5% of the market price. What is the cost of the preferred stock? rps = [pic] = [pic] = 5.41%. 5. Summerdahl Resorts' common stock is currently trading at $36 a share. The stock is expected to pay a dividend of $3.00 a share at the end of the year (D1 _ $3.00), and the dividend
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Introduction: JetBlue is planned to establish by David Neeleman in July 1999. Although the terrorist attacks of 9/11 made the huge loss of the whole airline industry, JetBlue airways try to publish its own IPO after 2 years of profitable operation in 2002, This case study is summarizing the step to publish the IPO. Following this, it will discuss the disadvantage and advantage to publish the IPO and use the financial data to evaluate the price is suit for the first publish. In this case, there
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the underwriters and investors. RISK EXPOSURE If we use variability of earnings as a working definition of risk. We find that a company’s risk is affected by the specific cost commitments, such as interest on debt or dividends on preferred shares. That each funding source entails. These commitments introduce financial leverage effects in the company’s earnings performance, or will heighten any financial leverage effects in the company’s earnings performance, or will heighten any financial
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Value Book Value (BV) How to Calculate It Shares Outstanding * Share Price Shareholders’ Equity(1) What It Means How much are we worth? How much are we worth according to our assets rather than the market? How much are we worth to everyone except preferred shareholders? How much are we worth according to our incomeproducing assets? How much money do we make after taxes? How much money is left to pass on to common shareholders? How much in dividends could we potentially issue to each common shareholder
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whether employee stock ownership plans (ESOPs) add or destroy value from a new perspective by examining the relation of the adoption of ESOP and the company cost of capital. Design/methodology/approach – The capital asset pricing model is used to estimate the company’s cost of equity capital, and the cost of debt is estimated using bond yield spreads. The weighted average cost of capital (WACC) is calculated as the weighted percentage of the firm funded by equity, preferred stock, and debt multiplied
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