P16.9 (LO 4) (EPS with Stock Dividend and Discontinued Operations) Christina Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Christina employs a fiscal year ending May 31.

Income from operations before income taxes for Christina was $1,400,000 and $660,000, respectively, for fiscal years ended May 31, 2021 and 2020. Christina experienced a loss from discontinued operations of $400,000 on March 3, 2021. A 20% combined income tax rate pertains to any and all of Christina Corporation's profits, gains, and losses.

Christina's capital structure consists of preferred stock and common stock. The company has not issued any convertible securities or warrants and there are no outstanding stock options.

Christina issued 40,000 shares of $100 par value, 6% cumulative preferred stock in 2017. All of this stock is outstanding, and no preferred dividends are in arrears.

There were 1,000,000 shares of $1 par common stock outstanding on June 1, 2019. On September 1, 2019, Christina sold an additional 400,000 shares of the common stock at $17 per share. Christina distributed a 20% stock dividend on the common shares outstanding on December 1, 2020. These were the only common stock transactions during the past 2 fiscal years.

Instructions
Determine the weighted-average number of common shares that would be used in computing earnings per share on the current comparative income statement for:
The year ended May 31, 2020.
The year ended May 31, 2021.
Starting with income from operations before income taxes, prepare a comparative income statement for the years ended May 31, 2021 and 2020. The statement will be part of Christina Corporation's annual report to stockholders and should include appropriate earnings per share presentation.
The capital structure of a corporation is the result of its past financing decisions. Furthermore, the earnings per share data presented on a corporation's financial statements is dependent upon the capital structure.
Explain why Christina Corporation is considered to have a simple capital structure.
Describe how earnings per share data would be presented for a corporation that has a complex capital structure.

Progressive Inc. (Progressive) is an investment company that recently raised $3,000,000 from a public financing. The Board of Directors has instructed the CFO to invest up to $2,000,000 in investments that it intends to actively trade and therefore will account for these investments at fair value through profit or loss.

On the advice of the company’s investment advisor, the following shares were purchased in October 2019:

During December 2019, Progressive received cash dividends of $40,000 from its investment in Monarch Bank of Canada.

In 2020, the following transactions took place:

January 25 50,000 shares of Leslee Resources Ltd. were purchased for $125,000.

May 17 6,000 shares of Monarch Bank of Canada were sold at $45 per share

June 17 75,000 shares of Lucky Limited were purchased at $15 per share

September 25 100,000 shares of Leslee Resources Ltd. were sold for net proceeds (i.e. after commissions) for $165,000. (For the purposes of determining the cost of shares sold, use the weighted average cost).

As part of its banking arrangement, the company pays no commissions on the purchase of shares but is charged a 2% commission on the sale of all investments.

Market Price of investments – presented on a per share basis

Required:

a) Prepare all journal entries relating to these investments for 2019.

b) Prepare all journal entries relating to these investments for 2020.

c) Briefly discuss why these investments are valued at current market value while other assets such as property, plant and equipment are not adjusted to fair market value.

Problem 23-08

Comparative balance sheet accounts of Oriole Company are presented below.

Additional data:

Oriole’s 2020 income statement is as follows.

(a) Compute net cash provided by operating activities under the direct method. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

(b) Prepare a statement of cash flows using the indirect method.

You have been asked to perform and present a stock valuation to the CEO prior to the annual shareholders meeting next week. The two models you have selected to value the firm are the dividend discount model and the discounted cash flow model. Explain why the estimates from the two valuation methods differ. Address the assumptions implicit in the models themselves as well as those you made during the valuation process.

You have been asked to perform and present a stock valuation to the CEO prior to the annual shareholders meeting next week. The two models you have selected to value the firm are the dividend discount model and the discounted cash flow model. Explain why the estimates from the two valuation methods differ. Address the assumptions implicit in the models themselves as well as those you made during the valuation process.

Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.

Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 95 units from beginning inventory and 225 units from the March 5 purchase; the March 29 sale consisted of 75 units from the March 18 purchase and 115 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to nearest whole dollar.)

From January 2015, Coffees R Us Pty Ltd (“CRU”), a small café, has rented space from Strip Shop Retailers Pty Ltd (“SSR”) at a strip of shops on Smith St. A clause in the lease agreement between CRU and SSR limits SSR from leasing any of the other shopfronts in Smith St to a direct competitor of CRU.

As at September 2017, CRU had accumulated debt of $6000 to SSR in late rental fees. CRU argued that it had suffered loss of trade as a result of SSR’s decision to rent space to another café, Organic Coffee Culture Pty Ltd (“OCC”), two doors down from CRU in April 2017, and that it was justified in not paying rent because it had lost more than $6000 in trade due to this alleged breach of the lease agreement.

In October 2017, SSR served a statutory demand upon the registered office of CRU under section 459E of the Corporations Act 2001 (Cth). The registered office was the office of CRU’s solicitors, however the company’s regular solicitor was on leave and did not bring the demand to the attention of CRU until 30 days had passed from the date of service. The solicitor advised CRU that it was too late to bring an application to set aside the statutory demand but that, if SSR applied to wind up CRU, CRU could then oppose the application. CRU told its solicitor that it is not in a position to pay the $6000 claimed by SSR, but that it is able to meet all other debts as they fall due.

On the 15^th of November 2017, SSR filed an application to wind up CRU under section 459P of the Corporations Act 2001 (Cth) relying on the presumption of insolvency arising under the statutory demand procedure.

A.    Advise Coffees R us Pty Ltd whether they can oppose SSR’s application to wind up the company and on what basis. [12 marks]

US Commercial banks have traditionally earned most of thier money from:

Over the past ten years, the legal and accounting costs of US banks have grown primarily because of which law?

Find an example of a company that was successful in outsourcing and one that was unsuccessful. Do you think outsourcing is good or bad for the US economy? Explain why. Provide your response in a Word document of no more than two pages in length.

Regarding Microsoft's financial statements:

Most of their efficiency ratios are low in comparison to the industry standard.

this includes Accounts Receivable Turnover, total asset turnover, and inventory turnover.

Why is this and what does that tell us about the company?