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1. At the Beginning of Year 1 Peter and Paul want to establish a new business in the form of a limited company. They both
1. At the Beginning of Year 1 Peter and Paul want to establish a new business in the form of a limited company. They both agree that each of them will buy 5,000 shares for a nominal value of 10.00 each. Required a) Show the balance sheet of the new business after the transaction. b) What part of the business does Paul own (in \%) and what is the value of his stake? c) What part of the business does Peter own (in \%) and what is the value of his stake? 2. During Year 1 During the next year the following transactions took place: - Purchased inventories for sales 50,000.00 (30\% on credit, 70% on cash) - Sold inventories for 90,000.00 (50\% on credit) - Cost of sales was 30,000.00 - Drawings or payment for dividends 0.00 Required a) Show the income statement and the balance sheet for the business at the end of the year. b) What part of the business does Paul own (in \%) and what is the value of his stake? c) What part of the business does Peter own (in % ) and what is the value of his stake? 3. Beginning of Year 2 At the beginning of the next year Peter and Paul decided that they want to buy a new machine. Therefore, they need another 160,000.00. Peter and Paul want to issue the necessary number of new shares and sell it to Sarah. They are willing to reduce their % of ownership. Still they don't want to lose money/value in this case. Required a) How many shares do they have to issue if the nominal value should remain 10.00 ? b) What is the selling price per share in this case? c) Prepare the balance sheet after this transaction. d) What part of the business does Paul own (in \%) and what is the value of his stake? e) What part of the business does Peter own (in \%) and what is the value of his stake? f) What part of the business does Sarah own (in \%) and what is the value of her stake
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