At 31 st of December 2019, John owned 25 of the common stock capital of a company called Empires Investment Ltd The company focuses on the local real estate market and shows increasing profits year after year At the beginning of the year 2020 the company presented the following Balance sheet EMPIRE'S INVESTMENT LTD BALANCE SHEET 1 OF JANUARY 2020 During the first months of the year, John heard the company made the following operations that may affect the situation of the ownership of the company On 24 of January the company decided a 10 stock dividend distribution to its stockholders on record at 25 st of February, to be paid on 15 of March The market value of the shares was estimated to 10 per share on 24 of January On 1st of March the company purchased 200 000 of its owns shared at a price of 10 per share In order to invest in a new project, the company decided to increase its financing issuing on 4 th of April 1,000,000 preferred stock with a 15 face value Said preferred stock will offer a 20 cumulative dividend On 1 st of May, the company reissued 50 of the stocks purchased on 1 st of March at a price per share of 12 The forecast presented by the board of the company during the last stockholders meeting showed the following perspectives of net income taking into account the new projects to be carried on in 2020 John would like to know how the different operations described below may affect his investment into the company What are the journal entries to be made by the company to register all the operations mentioned below (40 points) Calculate the amount of cash dividend payment for preferred stock to be expected at the end of the years 2020, 2021 and 202 Justify your answers and calculations (10 points) Assuming the forecast prepared by the directors of the company is correct regarding the net income, would the cash dividends to be expected remain the same taking into account the different movements described below Calculate the amount of cash dividend payment per share of common stock to be expected at the end of the years 2020, 2021 and 2022 Justify your answers and calculations (25 points) Instead of issuing preferred stock on 4 th of April, the company had the possibility to issues 15,000 of 8 Bonds of 1,000 face value Calculate the earning per share of common stock considering the company would have issued the bond instead of the preferred stock (explain your calculation) Do you agree with the board of Directors choice for the preferred stocks (Justify your answer) (25 points) SHOW CALCULATIONS PLEASE All the info is provided ASSETS Cash Land Buldings Acc Depr Building 2 005 000 200 000 1 200 000 200 000 Real Estate available for sale Construction in progress Total Assets 2 500 000 2 300 000 8 005 000 LIABILITIES Long term Note payable Accounts Payable 3 250 000 1 000 000 2 250 000 OWNER'S EQUITY Capital Stock (4 000 000 shares with 1$ par value) Retained Earnings Total Liabilities Owners Equity 4 755 000 2 000 000 2 755 000 8 005 000 Empire's Investments Ltd Net Income forecast Year Net Income 2020 120 000,00 2021 350 000,00 2022 12 200 000,00 Total 12 670 000,00 Average Year Div share 0,06 0,18 6,10 6,34 2,11

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At 31 st of December 2019, John owned 25% of the common stock capital of a company called Empires Investment Ltd. The company focuses on

At 31^st of December 2019, John owned 25% of the common stock capital of a company called Empires Investment Ltd. The company focuses on the local real estate market and shows increasing profits year after year. At the beginning of the year 2020 the company presented the following Balance sheet:

EMPIRE'S INVESTMENT LTD. BALANCE SHEET 1 OF JANUARY 2020 image text in transcribed

During the first months of the year, John heard the company made the following operations that may affect the situation of the ownership of the company:

On 24 of January the company decided a 10% stock dividend distribution to its stockholders on record at 25^st of February, to be paid on 15 of March. The market value of the shares was estimated to 10 per share on 24 of January. On 1st of March the company purchased 200.000 of its owns shared at a price of 10 per share In order to invest in a new project, the company decided to increase its financing issuing on 4^th of April 1,000,000 preferred stock with a 15 face value. Said preferred stock will offer a 20% cumulative dividend. On 1^st of May, the company reissued 50% of the stocks purchased on 1^st of March at a price per share of 12. The forecast presented by the board of the company during the last stockholders meeting showed the following perspectives of net income taking into account the new projects to be carried on in 2020.

image text in transcribed

John would like to know how the different operations described below may affect his investment into the company:

What are the journal entries to be made by the company to register all the operations mentioned below (40 points)
Calculate the amount of cash dividend payment for preferred stock to be expected at the end of the years 2020, 2021 and 202 ? Justify your answers and calculations. (10 points)
Assuming the forecast prepared by the directors of the company is correct regarding the net income, would the cash dividends to be expected remain the same taking into account the different movements described below? Calculate the amount of cash dividend payment per share of common stock to be expected at the end of the years 2020, 2021 and 2022. ? Justify your answers and calculations. (25 points)
Instead of issuing preferred stock on 4^th of April, the company had the possibility to issues 15,000 of 8% Bonds of 1,000 face value. Calculate the earning per share of common stock considering the company would have issued the bond instead of the preferred stock (explain your calculation). Do you agree with the board of Directors choice for the preferred stocks? (Justify your answer). (25 points)

SHOW CALCULATIONS PLEASE

All the info is provided

ASSETS Cash Land Buldings Acc. Depr. Building 2.005.000 200.000 1.200.000 200.000 Real Estate available for sale Construction in progress Total Assets 2.500.000 2.300.000 8.005.000 LIABILITIES Long term Note payable Accounts Payable 3.250.000 1.000.000 2.250.000 OWNER'S EQUITY Capital Stock (4.000.000 shares with 1$ par value) Retained Earnings Total Liabilities + Owners Equity 4.755.000 2.000.000 2.755.000 8.005.000 Empire's Investments Ltd Net Income forecast Year Net Income 2020 120.000,00 2021 350.000,00 2022 12.200.000,00 Total 12.670.000,00 Average / Year Div/ share 0,06 0,18 6,10 6,34 2,11