BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 13, Problem 1DQ
Textbook Problem

Of two corporations organized at approximately the same time and engaged in competing businesses, one issued $80 par common stock and the other issued $ 1 par common stock. Do the par designations provide any indication as to which stock is preferable as an investment? Explain.

Expert Solution
To determine

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receives a share of profit from the profits earned by the corporation.

To explain: which investment is better: common stock with a par value of $80 per share or common stock with a par value of $1 per share.

Explanation of Solution

Par value refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock. It is the minimum price at which a stock must be issued and is indiscriminately fixed by the corporation’s charter. Thus, it neither effects the market value of the share nor the investment decision of the investor. Hence, based on the par value, it cannot be decided that which stock is preferable as an investment.

Conclusion

Hence, either of the common stock could be a better investment depending upon the company’s profit generating ability.

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Chapter 13 Solutions

Accounting
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Ch. 13 - A Dividends per share Reinhardt Furniture Company...Ch. 13 - Dividends per share Zero Calories Company has...Ch. 13 - Entries for issuing stock On May 23, Stoltz Realty...Ch. 13 - Entries for issuing stock On January 22, Zentric...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Entries for stock dividends Pro-Builders...Ch. 13 - Entries for stock dividends Antique Buggy...Ch. 13 - Entries for treasury stock On January 31,...Ch. 13 - Entries for treasury stock On May 27, Hydro...Ch. 13 - Reporting stockholders' equity Using the following...Ch. 13 - Reporting stockholders' equity Using the following...Ch. 13 - Retained earnings statement Rockwell Inc. reported...Ch. 13 - Retained earnings statement None Cruises Inc....Ch. 13 - Earnings per share Financial statement data for...Ch. 13 - Earnings per share Financial statement data for...Ch. 13 - Dividends per share Imaging Inc., a developer of...Ch. 13 - Dividends per share Lightfoot Inc., a software...Ch. 13 - Entries for issuing par stock On October 31,...Ch. 13 - Entries for issuing no-par stock On February 12,...Ch. 13 - Issuing stock for assets other than cash On April...Ch. 13 - Selected stock transactions Alpha Sounds Corp., an...Ch. 13 - Issuing stock Willow Creek Nursery, with an...Ch. 13 - Issuing stock Work Place Products Inc., a...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Entries for stock dividends Senior Life Co. is an...Ch. 13 - Effect of stock split Copper Grill Restaurant...Ch. 13 - Effect of cash dividend and stock split Indicate...Ch. 13 - Selected dividend transactions, stock split...Ch. 13 - Treasury stock transactions Lava Lake Inc. bottles...Ch. 13 - Treasury stock transactions Lawn Spray Inc....Ch. 13 - Treasury stock transactions Biscayne Bay Water...Ch. 13 - Reporting paid-in capital The following accounts...Ch. 13 - Stockholders' Equity section of balance sheet The...Ch. 13 - Stockholders' Equity section of balance sheet...Ch. 13 - Retained earnings statement Sumter Pumps...Ch. 13 - Stockholders' Equity section of balance sheet List...Ch. 13 - Statement of stockholders' equity The...Ch. 13 - EPS Junkyard Am, Inc., had earnings of 516,000 for...Ch. 13 - EPS Pacific Gas and Electric Company is a large...Ch. 13 - EPS Caterpillar Inc. and Deere Company are two...Ch. 13 - Dividends on preferred and common stock Pecan...Ch. 13 - Stock transactions for corporate expansion On...Ch. 13 - Selected stock transactions The following selected...Ch. 13 - Entries for selected corporate transactions Morrow...Ch. 13 - Entries for selected corporate transactions...Ch. 13 - Dividends on preferred and common stock Yosemite...Ch. 13 - Stock transaction for corporate expansion Pulsar...Ch. 13 - Selected stock transactions Diamondback Welding ...Ch. 13 - Entries for selected corporate transactions Nav-Go...Ch. 13 - Entries for selected corporate transactions West...Ch. 13 - Ethics in Action Tommy Gunn is a division manager...Ch. 13 - Ethics in Action Lou Hoskins and Shirley Crothers...Ch. 13 - Communication Motion Designs Inc. has paid...Ch. 13 - Ethics in Action Bernie libbers, the CKO of...Ch. 13 - Issuing stock Epstein Engineering Inc. began...

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