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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Ethics in Action

Lou Hoskins and Shirley Crothers are organizing Red Lodge Metals Unlimited Inc. to undertake a high-risk gold-mining venture in Canada. Lou and Shirley tentatively plan to request authorization for 400,000,000 shares of common stock to be sold to the general public. Lou and Shirley have decided to establish par of $0.03 per share in order to appeal to a wide variety of potential investors. Lou and Shirley believe that investors would be more willing to invest in the company if they received a large quantity of shares for what might appear to be a “bargain" price.

Discuss whether Lou and Shirley are behaving in a professional manner.

To determine

Authorized stock: It refers to the maximum number of shares preferred or common shares allowed by the state charter to be issued by the company.

To discuss: Whether Person L is behaving in a professional manner.

Explanation

Yes, Person L is behaving in a professional manner. Since, they are disclosing complete information to the potential investors according to the federal regulations for the sale of securities to the public...

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