Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 7, Problem 7.1P
Authorized and available shares Aspin Corporation's charter authorizes issuance of 2,000,000 shares of common stock. Currently, 1,400,000 shares are outstanding, and 100,000 shares are being held as
- a. What is the maximum number of new shares of common stock the firm can sell without receiving further authorization from shareholders?
- b. Judging by the data given and your finding in part a, do you think the firm will be able to raise the needed funds without receiving further authorization?
- c. What must the firm do to obtain authorization to issue more than the number of shares found in part a?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Authorized and available shares Aspin Corporation's charter authorizes issuance of 2,100,000 shares of common stock. Currently, 1,500,000 shares are outstanding, and 500,000 shares are
being held as treasury stock. The firm wishes to raise $24,000,000 for a plant expansion. Discussions with its investment bankers indicate that the sale of new common stock will net the firm $30 per
share.
a. What is the maximum number of new shares of common stock that the firm can sell without receiving further authorization from shareholders?
b. Judging by the data given and your finding in part a, do you think the firm will be able to raise the needed funds without receiving further authorization?
c. What must the firm do to obtain authorization to issue more than the number of shares found in part a?
Authorized and available shares: Aspin Corporation's charter authorizes issuance of 2,700,000 shares of common stock. Currently, 1,100,000shares are outstanding, and 400,000 shares are being held as treasury stock. The firm wishes to raise $105,000,000 for a plant expansion. Discussions with its investment bankers indicate that the sale of new common stock will net the firm $50 per share.
a. What is the maximum number of shares of common stock that the firm can sell without receiving further authorization from shareholders?
b. Judging by the data given and your finding in part a, do you think the firm will be able to raise the needed funds without receiving further authorization?
c. What must the firm do to obtain authorization to issue more than the number of shares found in part
a?
Stock Example 1: Longpre Inc. is authorized to issue 1,500,000 shares of its $1 par value common stock and 400,000 shares of $50 par value preferred stock. Longpre plans to sell 20,000 shares of common stock at $38.50 and 1,000 shares of its preferred stock at $55 per share. How much capital will Longpre generate by this sale? What would be Longpre’s legal capital?
Stock Example 2: Howe Corporation plans to issue 7,400 shares of its $1 par value common stock for $34 per share and 800 shares of its $30 par value preferred stock for $33 per share. What would Howe’s legal capital be? What would be the amount of capital received in excess of the par value of common and preferred stock? Why is a distinction made between legal capital and total capital?
Chapter 7 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 7.1 - What are the key differences between debt and...Ch. 7.2 - What risks do common stockholders take that other...Ch. 7.2 - Prob. 7.3RQCh. 7.2 - Explain the relationships among authorized shares,...Ch. 7.2 - Prob. 7.5RQCh. 7.2 - Prob. 7.6RQCh. 7.2 - Explain the cumulative feature of preferred stock....Ch. 7.2 - Prob. 7.8RQCh. 7.2 - Prob. 7.9RQCh. 7.2 - Prob. 7.10RQ
Ch. 7.2 - Prob. 7.11RQCh. 7.3 - Prob. 1FOECh. 7.3 - Describe the events that occur in an efficient...Ch. 7.3 - Prob. 7.13RQCh. 7.3 - Describe, compare, and contrast the following...Ch. 7.3 - Describe the free cash flow valuation model, and...Ch. 7.3 - Explain each of the three other approaches to...Ch. 7.4 - Prob. 7.17RQCh. 7.4 - Assuming that all other variables remain...Ch. 7 - Prob. 1ORCh. 7 - Prob. 7.1STPCh. 7 - Prob. 7.2STPCh. 7 - Prob. 7.1WUECh. 7 - Prob. 7.2WUECh. 7 - Prob. 7.3WUECh. 7 - Prob. 7.4WUECh. 7 - Prob. 7.5WUECh. 7 - Prob. 7.6WUECh. 7 - Authorized and available shares Aspin...Ch. 7 - Prob. 7.2PCh. 7 - Learning Goal 2 P7-3 Preferred dividends In each...Ch. 7 - Learning Goal 2 P7-4 Convertible preferred stock...Ch. 7 - Learning Goal 4 P7-5 Preferred stock valuation TXS...Ch. 7 - Prob. 7.6PCh. 7 - Preferred stock valuation Jones Design wishes to...Ch. 7 - Learning Goal 4 P7-8 Common stock value: Constant...Ch. 7 - Common stock value: Constant growth McCracken...Ch. 7 - Prob. 7.10PCh. 7 - Prob. 7.11PCh. 7 - Prob. 7.12PCh. 7 - Learning Goal 4 P7-14 Common stock value: Variable...Ch. 7 - Prob. 7.14PCh. 7 - Prob. 7.15PCh. 7 - Prob. 7.16PCh. 7 - Prob. 7.17PCh. 7 - Prob. 7.19PCh. 7 - Prob. 7.20PCh. 7 - Prob. 7.21PCh. 7 - Prob. 7.22PCh. 7 - Prob. 7.23PCh. 7 - Prob. 7.24P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Comprehensive Young Corporation has been operating successfully for several years. It is authorized to issue 24,000 shares of no-par common stock and 6,000 shares of 8%, 100 par preferred stock. The Contributed Capital section of its January 1, 2019, balance sheet is as follows: Part a. A shareholder has raised the following questions: 1. What is the legal capital of the corporation? 2. At what average price per share has the preferred stock been issued? 3. How many shares of common stock have been issued (the common stock has been issued at an average price of 23 per share)? Part b. The company engaged in the following transactions in 2019: Required: 1. Answer the questions in Part a. 2. Prepare journal entries to record the transactions in Part b. 3. Prepare the Contributed Capital section of Youngs December 31, 2016, balance sheet.arrow_forwardContributed Capital Adams Companys records provide the following information on December 31, 2019: Additional information: 1. Common stock has a 5 par value, 50,000 shares are authorized, 15,000 shares have been issued and are outstanding. 2. Preferred stock has a 100 par value, 3,000 shares are authorized, 800 shares have been issued and are outstanding. Two hundred shares have been subscribed at 120 per share. The stock pays an 8% dividend, is cumulative, and is callable at 130 per share. 3. Bonds payable mature on January 1, 2023. They carry a 12% annual interest rate, payable semiannually. Required: Prepare the Contributed Capital section of the December 31, 2019, balance sheet for Adams. Include appropriate parenthetical notes.arrow_forwardA corporate charter specifies that the company may sell up to 40 million shares of stock. The company issues 32 million shares to investors and later repurchases 13.0 million shares. The number of issued shares after these transactions have been accounted for is Multiple Choice 32 million shares 20 million shares 19 million shares. 27 million sharesarrow_forward
- Aspin Corporation's charter authorizes issuance of 2,600,000 shares of common stock.Currently, 1,200,000 shares are outstanding, and 300,000 shares are being held as treasury stock. The firm wishes to raise $105,000,000 for a plant expansion. Discussions with its investment bankers indicate that the sale of new common stock will net the firm $70 per share. a. What is the maximum number of shares of common stock that the firm can sell without receiving further authorization from shareholders? b. Judging by the data given and your finding in part a,do you think the firm will be able to raise the needed funds without receiving further authorization? c. What must the firm do to obtain authorization to issue more than the number of shares found in part a?arrow_forwardAnswer both the subparts a,b.if Answered within 30mins, it would be great. Bridgeport Corporation’s charter authorized 2 million shares of $13 par value common shares, and 300,000 shares of 8% cumulative and non-participating preferred shares, with a par value of $100 per share. The corporation made the following share transactions through December 31, 2020: 300,000 common shares were issued for $4.50 million and 10,000 preferred shares were issued for machinery valued at $1,501,000. Subscriptions for 10,100 common shares have been taken, and 25% of the subscription price of $17 per share has been collected. The shares will be issued upon collection of the subscription price in full. In addition, 9,000 common shares have been repurchased for $16 and retired. The Retained Earnings balance is $240,000 before considering the transactions above. a) Prepare the shareholders’ equity section of the SFP in good form. b) Prepare the shareholders’ equity section of the statement of financial…arrow_forwardQuestion 1.) 10,000 non-par value share were issued at P4. The journal entry includes a credit of? A. APIC P4,000 B. Share Capital P40,000 C. Share Capital P10,000 D. Cash P40,000 Question 2.) When Marlou Corp. was formed on January 2020, the corporate charter provided for 100,000 share of P10 par Value stock. The corporation issues 9,000 shares at a price of P23 per share. The entry to record the above transaction would include a? A. credit Additional paid in capital for P117,000 B. credit Share Capital for P207,000 C. debit Share Capital for P90,000 D. debit Cash for P90,000 Question 3.) A corporation issues 2,500 shares of common stock for P45,000. The stock has stated value of P10 per share. The journal entry to record the stock issuance would include a credit to Additional Paid in Capital of? A. P45,000 B. P25.000 C. P20,000 D. P5,000 Question 4.) A corporation issues 2,500 shares of common stock for P45,000. The stock has stated value of P10 per share . The journal entry to…arrow_forward
- The corporate charter of Alpaca Company authorized the issuance of 10 million, $1 par common shares. During 2024, its first year of operations, Alpaca had the following transactions: January 1 sold 8 million shares at $15 per share June 3 retired 2 million shares at $18 per share December 28 sold 2 million shares at $20 per share What amount should Alpaca report as additional paid-in capital—excess of par, in its December 31, 2024, balance sheetarrow_forwardProblem1: The Ianey Corporation is authorized to issue 120,000 shares of P 220 par value ordinary share capital. Ianey has the following transactions during the month: * Issued 24,200 shares at par, receiving cash. * Issued 320 shares to attorneys for services in securing the corporate charter and for preliminary legal costs of organizing the corporation. The value of the service was P 85,500. * Issued 15,600 ordinary shares in exchange for a land and a building with fair market values of P 1,320,000 and P 2,780,000, respectively. * Received cash for 8,200 ordinary shares sold at P 310 per share. Questions: 1. What is the amount that is to be reported as Ordinary share capital in the statement of financial position? 2. What is the amount that is to be reported as Share premium - ordinary share in the statement of financial position?arrow_forwardThe corporate charter of Benjo Corporation allows the issuance of a maximum of 2,500,000 shares of P1 par value common stock. During its first three years of operation, Benjo issued 1,500,000 shares at P15 per share. It later acquired 30,000 of these shares as treasury stock for P25 per share. 1. How many shares were authorized? 2. How many shares were issued? 3. How many shares are outstanding? 4. What is the balance of the Common Stock account? 5. What is the balance of the Treasury Stock account?arrow_forward
- Current Attempt in Progress Skysong Corporation is authorized to issue 48,000 shares of $5 par value common stock. During 2025, Skysong took part in the following selected transactions. a. b. C. d. Issued 4,600 shares of stock at $48 per share, less costs related to the issuance of the stock totaling $8,100. Issued 1,000 shares of stock for land appraised at $48,000. The stock was actively traded on a national stock exchange at approximately $49 per share on the date of issuance. Purchased 490 shares of treasury stock at $45 per share. The treasury shares purchased were issued in 2021 at $42 per share. Retired the treasury shares purchased in part (c). Prepare the journal entries to record these transactions using the cost method. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) a. No. Account…arrow_forwardGeneral Mills is authorized to issue 13 million, $1 par common shares. During 2021, its first year of operations, General Mills had the following transactions: January 1 sold 11 million shares at $18 per share. June 3 purchased 5 million shares of treasury stock at $21 per share December 28 sold the 5 million shares of treasury stock at $23 per share What amount should General Mills report as additional paid-in capital in its December 31, 2021, balance sheet? Multiple Choice O O O $203 million $187 million $197 million $155 millionarrow_forwardQuestion 2.) When Marlou Corp. was formed on January 2020, the corporate charter provided for 100,000 share of P10 par Value stock. The corporation issues 9,000 shares at a price of P23 per share. The entry to record the above transaction would include a? A. credit Additional paid in capital for P117,000 B. credit Share Capital for P207,000 C. debit Share Capital for P90,000 D. debit Cash for P90,000arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
Earnings per share (EPS), basic and diluted; Author: Bionic Turtle;https://www.youtube.com/watch?v=i2IJTpvZmH4;License: Standard Youtube License