1. Decide whether each of the following statements is true or false. (Click the icon to view the statements.) 2. Grace Inc., an auto parts manufacturer, has two classes of common shares. Class A shares are entitled to one vote, whereas Class B shares are entitled to 100 votes. The two classes rank equally for dividends. The following is extracted from a recent annual report. (Click the icon to view the shareholders' equity report.) 1. Decide whether each of the following statements is true or false. a. The policy-making body in a corporation is called the board of directors. The owner of 200 preferred shares has greater voting rights than the owner of 200 b. common shares. Issuance of 1,000 common shares of $11 per share increases share capital by c. $11,000. A corporation issues its preferred shares in exchange for land and a building with a combined fair value of $180,000. This transaction increases the corporation's d. owners' equity by $180,000 regardless of the assets' prior book values. e. Preferred shares are a riskier investment than common shares. 2. Grace Inc., an auto parts manufacturer, has two classes of common shares. Class A shares are entitled to one vote, whereas Class B shares are entitled to 100 votes. The two classes rank equally for dividends. 2a. Record the issuance of the Class A common shares. Use the Grace Inc. account titles. (Record debits first, then credits. Exclude explanations from any journal entries. If a box is not used in the journal entry, leave the box empty; do not select a label or enter a zero.) 2b. Record the issuance of the Class B common shares. Use the Grace Inc. account titles. (Record debits first, then credits. Exclude explanations from any journal entries. If a box is not used in the journal entry, leave the box empty; do not select a label or enter a zero.) 2c. How much of Grace Inc.'s shareholders' equity was contributed by the shareholders? How much was provided by profitable operations? Does this division of equity suggest that the company has been successful? Why or why not? The shareholders contributed $ to shareholders' equity and $ was provided by profitable operations. This division suggests that the company been successful because almost all of its shareholders' equity has come from 2d. Write a sentence to describe what Grace Inc.'s shareholders' equity balance means. The total of Grace's shareholders' equity indicates that the have a claim to $ of the company's Shareholders' Equity Share capital Class A common shares, no stated value (authorized and issued 1,270 shares) $2,540 Class B common shares, no stated value (authorizedandissued46,100shares)Totalsharecapital11,200 Retained earnings Total shareholders' equity $886,149 Statements a. The policy-making body in a corporation is called the board of directors. b. The owner of 200 preferred shares has greater voting rights than the owner of 200 common shares. c. Issuance of 1,000 common shares of $11 per share increases share capital by $11,000. d. A corporation issues its preferred shares in exchange for land and a building with a combined fair value of $180,000. This transaction increases the corporation's owners' equity by $180,000 regardless of the assets' prior book values. e. Preferred shares are a riskier investment than common shares
