Question

In: Accounting

Nash Inc. began operations in January 2015 and reported the following results for each of its...

Nash Inc. began operations in January 2015 and reported the following results for each of its 3 years of operations.

2015 $ 260,000 net loss

2016 $ 37,000 net loss

2017 $ 819,000 net income

At December 31, 2017, Nash Inc. capital accounts were as follows.

7% cumulative preferred stock, par value $100; authorized, issued, and outstanding 4,700 shares $ 470,000 Common stock, par value $1.00; authorized 1,000,000 shares; issued and outstanding 818,000 shares $ 818,000 Nash Inc. has never paid a cash or stock dividend. There has been no change in the capital accounts since Nash began operations. The state law permits dividends only from retained earnings.

(a) Compute the book value of the common stock at December 31, 2017.

(b) Compute the book value of the common stock at December 31, 2017, assuming that the preferred stock has a liquidating value of $ 108 per share.

Expert Solution

Retained earnings balance	Amount (in$)
2015	-260000
2016	-37000
2017	819000
	522000
Less: preferred dividend	-98700
Available to common stock holders	423300

(A.) Compute the book value of the common stock at December 31, 2017

Preferred stock	$470000
Common stock	$818000
Retained earnings
Preferred dividend for 3 years (4700007%3)	$98700
Dividend to common stock holders	$423300

a.	Balance in common stock	$1241300
b.	Number of common stock shares outstanding	$818000
	Book value of per common stock share (a/b)	$1.517

B.

Retained earnings balance	Amount (in$)
2015	-260000
2016	-37000
2017	819000
	522000
Less: liquid premium to preferred stock (4700*8)	37600
	484400
Preferred dividend	98700
Available to common stock holders	385700

(B.) Compute the book value of the common stock at December 31, 2017

assuming the preferred stock has liquidating value of $108

Preferred stock	$470000
Common stock	$818000
Retained earnings
Preferred dividend for 3 years (4700007%3)	$98700
Dividend to common stock holders	$385700

a.	Balance in common stock (818000+385700)	$1203700
b.	Number of common stock shares outstanding	$818000
	Book value of per common stock share (a/b)	$1.471

ekkarill92 answered 4 months ago

Splish Inc. began operations in January 2015 and reported the following results for each of its...

Splish Inc. began operations in January 2015 and reported the following results for each of its 3 years of operations. 2015 $284,000 net loss 2016 $40,000 net loss 2017 $869,000 net income At December 31, 2017, Splish Inc. capital accounts were as follows. 7% cumulative preferred stock, par value $100; authorized, issued, and outstanding 5,100 shares $510,000 Common stock, par value $1.00; authorized 1,000,000 shares; issued and outstanding 721,000 shares $721,000 Splish Inc. has never paid a cash or stock...

B Inc. began operations in January 2018 and reported the following results for each of its...

B Inc. began operations in January 2018 and reported the following results for each of its 3 years of operations. 2018 $278,000 net loss 2019 $43,000 net loss 2020 $866,000 net income At December 31, 2020, B Inc. capital accounts were as follows. 7% cumulative preferred stock, par value $100; authorized, issued, and outstanding 4,700 shares $470,000 Common stock, par value $1.00; authorized 1,000,000 shares; issued and outstanding 680,000 shares $680,000 B Inc. has never paid a cash or stock...

Ayayai Inc. began operations in January 2018 and reported the following results for each of its...

Ayayai Inc. began operations in January 2018 and reported the following results for each of its 3 years of operations. 2018 $246,000 net loss 2019 $38,000 net loss 2020 $835,000 net income At December 31, 2020, Ayayai Inc. capital accounts were as follows. 8% cumulative preferred stock, par value $100; authorized, issued, and outstanding 5,400 shares $540,000 Common stock, par value $1.00; authorized 1,000,000 shares; issued and outstanding 693,000 shares $693,000 Ayayai Inc. has never paid a cash or stock...

Marigold Inc. began operations in January 2018 and reported the following results for each of its...

Marigold Inc. began operations in January 2018 and reported the following results for each of its 3 years of operations. 2018 $268,000 net loss 2019 $38,000 net loss 2020 $775,000 net income At December 31, 2020, Marigold Inc. capital accounts were as follows. 8% cumulative preferred stock, par value $100; authorized, issued, and outstanding 4,500 shares $450,000 Common stock, par value $1.00; authorized 1,000,000 shares; issued and outstanding 741,000 shares $741,000 Marigold Inc. has never paid a cash or stock...

Exercise 15-24 Johnstone Inc. began operations in January 2014 and reported the following results for each...

Exercise 15-24 Johnstone Inc. began operations in January 2014 and reported the following results for each of its 3 years of operations. 2014 $260,000 net loss 2015 $40,000 net loss 2016 $700,000 net income At December 31, 2016, Johnstone Inc. share capital accounts were as follows. Share Capital—Preference, 6% cumulative, par value $100; authorized, issued, and outstanding 5,000 shares $500,000 Share Capital—Ordinary, par value $1.00; authorized 1,000,000 shares; issued and outstanding 750,000 shares $750,000 Johnstone Inc. has never...

Nash Football Shop began operations on January 2, 2017. The following stock record card for footballs...

Nash Football Shop began operations on January 2, 2017. The following stock record card for footballs was taken from the records at the end of the year. Date Voucher Terms Units Received Unit Invoice Cost Gross Invoice Amount 1/15 10624 Net 30 57 $24 $1,368 3/15 11437 1/5, net 30 72 20 1,440 6/20 21332 1/10, net 30 97 18 1,746 9/12 27644 1/10, net 30 91 15 1,365 11/24 31269 1/10, net 30 83 13 1,079 Totals 400 $6,998...

Sims Company, a manufacturer of tablet computers, began operations on January 1, 2015. Its cost and...

Sims Company, a manufacturer of tablet computers, began operations on January 1, 2015. Its cost and sales information for this year follows. Manufacturing costs Direct materials $ 35 per unit Direct labor $ 55 per unit Overhead costs for the year Variable overhead $ 4,200,000 Fixed overhead $ 6,300,000 Selling and administrative costs for the year Variable $ 800,000 Fixed $ 4,500,000 Production and sales for the year Units produced 105,000 units Units sold 75,000 units Sales price per unit...

Navaroli Company began operations on January 5, 2015. Cost and sales information for its first two...

Navaroli Company began operations on January 5, 2015. Cost and sales information for its first two calendar years of operations are summarized below. Manufacturing Costs: Direct materials $80 per unit Direct labor $120 per unit Factory overhead costs: Variable overhead $30 per unit Fixed overhead $14,000,000 Nonmanufacturing costs Variable selling and administrative $10 per unit Fixed selling and administrative $8,000,000 Production and sales data 2015 2016 Units produced 200,000 units 80,000 Units sold 140,000 140,000 Units in ending inventory 60,000...

Liang Company began operations on January 1, 2015. During its first two years, the company completed...

Liang Company began operations on January 1, 2015. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. 2015 Sold $1,350,300 of merchandise (that had cost $975,800) on credit, terms n/30. Wrote off $19,300 of uncollectible accounts receivable. Received $671,600 cash in payment of accounts receivable. In adjusting the accounts on December 31, the company estimated that 1.10% of accounts receivable will...

Nash Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory....

Nash Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2021. The following information is available for the years 2018–2020. Net Income Computed Using Average-Cost Method FIFO Method LIFO Method 2018 $15,980 $19,140 $12,070 2019 18,090 21,090 14,040 2020 20,130 24,990 16,940 (a) Prepare the journal entry necessary to record a change from the average cost method to the FIFO method in 2021. Account Titles...