they gain by selecting a corporate form of business now? Distinguish between par value and issue price. If they decide to issue $1 par common stock and anticipate an initial market price of $80 per share, how many shares will they need to issue to raise $4,000,000? The owners are desirous of comparing serval fina
Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a
Requirements:
- What is the main advantage they gain by selecting a corporate form of business now?
- Distinguish between par value and issue price.
- If they decide to issue $1 par common stock and anticipate an initial market price of $80 per share, how many shares will they need to issue to raise $4,000,000?
- The owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020. In addition, E&B Comic Bookstore Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative
preferred stock . They have asked each student from your accounting course to prepare the company’sjournal entries and statement of owner’s equity based on the following information which is grouped according to your first name initial.
- Issued ____shares of class A common stock. Stock has par value of ___ per share and was issued at $____ per share.
|
firstname Initial |
# of shares issued |
Par Value |
Issue Price |
|
S, W, G, Z |
50% of authorised shares |
$45.00 |
$75.00 |
- Issued _____ shares of no-par class B stock
|
firstname Initial |
# of shares issued |
Issue Price |
|
S, W, G, Z |
50% of authorised shares |
$70.00 |
- Issued _______ shares of preferred stock at par value.
|
firstname Initial |
# of shares issued |
Par Value |
|
S, W, G, Z |
25 % of authorised shares |
$145.00 |
- Exchanged ______ shares of class A common stock for Office Furniture and Equipment with an appraised value of
$______ and Motor Truck with an appraised value of $_____.
|
firstname Initial |
# of shares issued |
Office Furniture & Equipment |
Motor truck |
|
S, W, G, Z |
40% of authorised shares |
$ 4,000,000.00 |
$ 10,000,000.00 |
- Earned Net income $______.
|
firstname Initial |
Net Income |
|
S, W, G, Z |
$ 1,400,000.00 |
- Declared interim dividends for preferred shareholders as well as $.80 per share to common stockholders.
Using the info above and as a guide:
- Prepare the journal entries with narrations to record the following:
- The issuances of stock.
- Close out net income to
retained earnings . - Dividend declared.
- Close out dividend to retained earnings.
- Prepare the company’s
Stockholders equity section of the balance sheet at December 31, 2020. (Hint!!!!!!!) The following information must be clearly stated/shown: - Information on par or par values for all classes of shares which must be shown separately.
- The number of shares authorized and issued where necessary.
- The sub total for the total paid in capital.
- Retained earnings.
- total stockholders’ equity.
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