Question 5 (Q 6) The shareholders' equity section of the statement of financial position of Dolce...

Question 5 (Q 6)

The shareholders' equity section of the statement of financial position of Dolce Corporation as at December 31, 2020, is given below:

Shareholders' equity:
Preferred shares, $9 non-cumulative, unlimited authorized, 200,000 shares issued and outstanding	$ 5,000,000
Common shares, unlimited authorized, par value $30, 250,000 shares issued and outstanding	7,500,000
Retained earnings	4,500,000
Total shareholders' equity	$17,000,000

The board of directors for Dolce Corporation feels it is important that its shares trade at or below $50 per share in order to attract the maximum number of investors. The market price is currently $150 per share.

Required

What would you recommend to the board of directors in order to maintain the share price at $50 per share?

What would be the expected market price per share based on your recommendation in part “a” above?

Prepare the journal entry for your recommendation.

Solutions

Expert Solution

What would you recommend to the board of directors in order to maintain the share price at $50 per share?

I recommended to board of directors to declared the stock-split.
Stock split helps to minimize the market price per share.

Current market price per share		$ 150
Divided: target market price per share		$ 50
Stock split ratio		3

Board of directors should be declared the 3-for-1 stock split in order to maintain the share price at $50 per share.

What would be the expected market price per share based on your recommendation in part “a” above?

Current market price per share		$ 150
Divided by: recommended stock split ratio		3
Expected market price per share		$ 50

Prepare the journal entry for your recommendation.

No journal entry would not be required for stock split.

Stock split should be affect on par value of common share, number of shares issued and outstanding
After stock split, par value of common share (30/3)		$ 10
After stock split, number of shares issued and outstanding (250000*3)		750,000

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

"Contributed Capital & Treasury Stock" The Contributed Capital section of Shareholders Equity of the financial statement...

"Contributed Capital & Treasury Stock" The Contributed Capital section of Shareholders Equity of the financial statement usually includes the capital stock and additional paid in capital. Discuss the FASB rationale for requiring additional disclosures regarding capital stock and additional paid in capital Accounting for Treasury Stock: What are treasury stocks? Why would a Corporation want to buy back its stock? Discuss the Cost Method and the Par Value Method for accounting for Treasury Stock.

Question text Accounting for Shareholders' Equity Transactions The shareholders' equity section of the balance sheet of...

Question text Accounting for Shareholders' Equity Transactions The shareholders' equity section of the balance sheet of The Claremont Company appeared as follows at the end of the first year of operations: Common stock, $0.08 par value $480,000 Additional paid-in-capital 71,520,000 Retained earnings 25,600,000 Treasury stock (6,000,000) Shareholders' equity $91,600,000 During the second year of operations, the following transactions occurred: Generated net income of $4.8 million. Paid a cash dividend of $1.2 million. Purchased 100,000 shares of common stock at $7.6...

Problem 18-5 (Algo) Shareholders' equity transactions; statement of shareholders' equity [LO18-6, 18-7, 18-8] Listed below are...

Problem 18-5 (Algo) Shareholders' equity transactions; statement of shareholders' equity [LO18-6, 18-7, 18-8] Listed below are the transactions that affected the shareholders’ equity of Branch-Rickie Corporation during the period 2021–2023. At December 31, 2020, the corporation’s accounts included: ($ in thousands) Common stock, 101 million shares at $1 par $ 101,000 Paid-in capital—excess of par 600,000 Retained earnings 800,000 November 1, 2021, the board of directors declared a cash dividend of $0.60 per share on its common shares, payable to...

Prepare an income statement, a statement of changes in equity, and a statement of financial position...

Prepare an income statement, a statement of changes in equity, and a statement of financial position for Norman Rae Ltd., a service business, from the items listed below for the month of October, 2018: ...... Accounts payable............................................................................. $10,000 ...... Accounts receivable......................................................................... 14,000 ...... Cash................................................................................................. 10,000 ...... Common shares............................................................................... 28,000 ...... Dividends paid.................................................................................. 6,000 ...... Income tax expense......................................................................... 4,500 ...... Equipment........................................................................................ 30,000 ...... Supplies............................................................................................ 2,800er. ...... Supplies expense............................................................................. 3,500 ...... Rent expense......................................................................................

1. Discuss the relationship between the income statement and the shareholders' equity section of the balance...

1. Discuss the relationship between the income statement and the shareholders' equity section of the balance sheet.

Question 1. Following is the shareholders' equity section of the balance sheet of the Everslim Corporation:...

Question 1. Following is the shareholders' equity section of the balance sheet of the Everslim Corporation: The number of common shares authorized and issued after the distribution of a 15% common stock dividend is: Select one: a. 115,000 and 74,750 b. 100,000 and 65,000 c. 115,000 and 65,000 d. 100,000 and 74,750 Question 2. Proceeds from the issuance of shares appear in which, if any, section of the cash flow statement? Select one: a. operating activities section b. investing activities...

Question 6 The following are selected statement of financial position accounts of Concord Ltd. at December...

Question 6 The following are selected statement of financial position accounts of Concord Ltd. at December 31, 2019 and 2020, and the increases or decreases in each account from 2019 to 2020. Also presented is the selected income statement and other information for the year ended December 31, 2020. Statement of Financial Position (selected accounts) Assets 2020 2019 Increase (Decrease) Accounts receivable $84,600 $73,400 $11,200 FV-NI investments 39,750 49,800 (10,050 ) Property, plant, and equipment 180,200 148,100 32,100 Accumulated depreciation...

Why is the liabilities section of the statement of financial position of primary significance to bankers?

Multilple choice Comprehensive income can be reported: a)on the income statement. b)in the shareholders’ equity section...

Multilple choice Comprehensive income can be reported: a)on the income statement. b)in the shareholders’ equity section of the balance sheet. c)on the statement of retained earnings. d)combined with the income statement.

Vega Company reported the following shareholders’ equity section in its most recent balance sheet. Shareholders’ Equity...

Vega Company reported the following shareholders’ equity section in its most recent balance sheet. Shareholders’ Equity Common Stock ($1 par, 2,000,000 shares authorized, 100,000 shares issued, 95,000 shares outstanding) $ 100,000 Additional Paid-in Capital 1,900,000 Total Contributed Capital 2,000,000 Retained Earnings 3,100,000 Total Contributed Capital and Retained Earnings 5,100,000 Less: Cost of Treasury Stock (5,000 shares) (75,000) Total shareholders’ Equity 5,025,000 Prepare the Shareholders’ Equity section for Vega Company if a) Vega declares 100% stock dividend; b) Vega does a...

Subjects