Background

Louisville Farms, is a breeder of racehorses. The CEO John Carter needs assistance and advice with his financials to allow him to concentrate on the horse breeding rather than trying to figure out the best accounting approaches. You have been recruited as a consultant by the CEO as recent graduate from EU Business school to help out.

QUESTION 3:

(Points 35) 3.1. Why is noncumulative preferred stock often considered an unattractive form of investment?

3.2. State the balance sheet or income statement classification (asset, liability, stockholders' equity, revenue, or expense) of each of the following accounts:

A. Cash(receivedfromtheissuanceofcapitalstock). B. OrganizationCosts. C. Preferred Stock. D. Retained Earnings.

E. AdditionalPaid-inCapital. F. IncomeTaxesPayable.

3.3. Louisville Farms, sold 10,000 shares of common stock, which has a par value of $8, for $13 per share. The company's balance in retained earnings is $75,000. Prepare the stockholders' equity section of the company's balance sheet.