Question

Required information CC11-1 Accounting for Equity Financing [LO 11-1, LO 11-2, LO 11-3, LO 11-4, LO 11-5] [The following information applies to the questions displayed below.]   Nicole has been financing Nicole’s Getaway Spa (NGS) using equity financing. Currently NGS has authorized 100,000 no-par preferred shares and 200,000 $2 par common shares. Outstanding shares include 59,000 preferred shares and 49,000 common shares.   Recently the following transactions have taken place.    NGS issues 1,450 preferred shares for $12 a share. NGS repurchases 1,450 common shares for $11 a share. On November 12, the board of directors declares a $0.50 cash dividend on each outstanding preferred share. The dividend is paid December 20. CC11-1 Part 1 Required: Prepare the journal entries needed for each of the transactions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)


Required information CC11-1 Accounting for Equity Financing [LO 11-1, LO 11-2, LO 11-3, LO 11-4, LO 11-5] [The following information applies to the questions displayed below.]   Nicole has been financing Nicole’s Getaway Spa (NGS) using equity financing. Currently NGS has authorized 100,000 no-par preferred shares and 200,000 $2 par common shares. Outstanding shares include 59,000 preferred shares and 49,000 common shares.   Recently the following transactions have taken place.    NGS issues 1,450 preferred shares for $12 a share. NGS repurchases 1,450 common shares for $11 a share. On November 12, the board of directors declares a $0.50 cash dividend on each outstanding preferred share. The dividend is paid December 20. CC11-1 Part 2 If you were a common shareholder concerned about your voting rights, would you prefer Nicole to issue additional common shares or additional preferred shares?   Additional Common Shares Additional Preferred Shares

Required information CC11-1 Accounting for Equity Financing [LO 11-1, LO 11-2, LO 11-3, LO 11-4, LO 11-5] [The following information applies to the questions displayed below.]   Nicole has been financing Nicole’s Getaway Spa (NGS) using equity financing. Currently NGS has authorized 100,000 no-par preferred shares and 200,000 $2 par common shares. Outstanding shares include 59,000 preferred shares and 49,000 common shares.   Recently the following transactions have taken place.    NGS issues 1,450 preferred shares for $12 a share. NGS repurchases 1,450 common shares for $11 a share. On November 12, the board of directors declares a $0.50 cash dividend on each outstanding preferred share. The dividend is paid December 20. CC11-1 Part 4 How would each transaction affect the ROE ratio? (Use + for increase, − for decrease, and NE for no effect.)   

Answer 1

Requirement-1

NGS issues 1,450 preferred shares for $12 a share
	Bank A/c (1,450*12)                                            Dr.      To Preferred shares A/c	17,400	17,400
NGS repurchases 1,450 common shares for $11 a share
	Treasury stock A/c   (1,450*11)                            Dr.      To Bank A/c	15,950	15,950
The board of directors declares a $0.50 cash dividend on each outstanding preferred share
	P & L Appropriation A/c (60,450*0.50)              Dr.      To Dividend payable A/c	30,225	30,225
The dividend is paid December 20
	Dividend payable A/c                                            Dr.      To Bank A/c	30,225	30,225