I do not need the first four answered!! just 5-9
Distributions Worksheet At the organizational meeting of AID, Inc., Ashley, Ian, and Dallas, acting in their capacity as the Board of Directors, approved the issuance of 1,000 shares of $1 par common stock to each of them at a price of $5 per share (for a total issuance of 3,000 shares). Each of them paid the corporation $5,000 and received a share certificate evidencing 1,000 shares. 1. After the issuance of such shares: Assets $15,000 Liabilities 0 Equity Stated Capital (BOC 21.002(11)) Surplus (BOC 21.002(12)) 2. In year one, the corporation has net income of $10,000: Assets $25,000 Liabilities 0 Equity Stated Capital Surplus Maximum amount the corporation may pay as a dividend to shareholders at end of year one (See BOC 21.301(1)(B), 21.303(b)): $ (S per share) 3. In year two, the corporation loses $4,000: Assets $21,000 Liabilities 0 Equity Stated Capital Surplus 4. Ian wants out, and the other shareholders want the corporation to buy out Ian's shares. What are his shares worth? One valuation method (not necessarily a realistic value) is book value. The book value of his shares (i.e., the value of his shares based upon the net worth of the corporation as reflected on the books of the corporation) is $ May the corporation repurchase Ian's shares for this amount? (See BOC 21.002()(A)(ii), 21.301(1)(B), 21.303(b)) 1) 2) Would the corporation be insolvent (BOC 1.002(40))? Does purchase price exceed surplus? 5. If the corporation purchases Ian's shares for cash at book value (See BOC 21.002(13), 21.171(c), (d)): Assets $ Liabilities 0 Equity Stated Capital Surplus (fn: incl. 1,000 treas. sh.) 6. If the corporation gives Ian a note instead of cash for his shares: Assets $ Liabilities $ Equity Stated Capital Surplus (fn: incl. 1,000 treas. sh.) If the corporation incurs other liabilities, is Ian in as favorable a position as any other creditor? (See BOC 21.308(a)) As the note becomes due and payable in the future, will the corporation be prohibited from making a payment on the note if the amount of the payment exceeds the amount of surplus at the time, i.e., is each note payment treated as a distribution? (See BOC 21.315(b)(1)) 7. If the corporation cancels the treasury shares (See BOC 21.252(a), (b)): Assets Liabilities $ Equity Stated Capital Surplus 8. If the corporation then pays Ashley and Dallas a 1 for 1 share dividend out of authorized but unissued shares of common stock (See BOC 21.310, 21.311(1), 21.313(a)): Assets Liabilities $ Equity Stated Capital Surplus 9. If the corporation paid Ashley and Dallas a share dividend of 1,000 shares out of the treasury shares purchased from Ian rather than cancelling the shares (i.e., go to results in example no. 5 or 6 and show result of payment of treasury shares as dividend thereafter rather than cancellation of such shares): Assets Liabilities $ Equity Stated Cap Surplus Distributions Worksheet At the organizational meeting of AID, Inc., Ashley, Ian, and Dallas, acting in their capacity as the Board of Directors, approved the issuance of 1,000 shares of $1 par common stock to each of them at a price of $5 per share (for a total issuance of 3,000 shares). Each of them paid the corporation $5,000 and received a share certificate evidencing 1,000 shares. 1. After the issuance of such shares: Assets $15,000 Liabilities 0 Equity Stated Capital (BOC 21.002(11)) Surplus (BOC 21.002(12)) 2. In year one, the corporation has net income of $10,000: Assets $25,000 Liabilities 0 Equity Stated Capital Surplus Maximum amount the corporation may pay as a dividend to shareholders at end of year one (See BOC 21.301(1)(B), 21.303(b)): $ (S per share) 3. In year two, the corporation loses $4,000: Assets $21,000 Liabilities 0 Equity Stated Capital Surplus 4. Ian wants out, and the other shareholders want the corporation to buy out Ian's shares. What are his shares worth? One valuation method (not necessarily a realistic value) is book value. The book value of his shares (i.e., the value of his shares based upon the net worth of the corporation as reflected on the books of the corporation) is $ May the corporation repurchase Ian's shares for this amount? (See BOC 21.002()(A)(ii), 21.301(1)(B), 21.303(b)) 1) 2) Would the corporation be insolvent (BOC 1.002(40))? Does purchase price exceed surplus? 5. If the corporation purchases Ian's shares for cash at book value (See BOC 21.002(13), 21.171(c), (d)): Assets $ Liabilities 0 Equity Stated Capital Surplus (fn: incl. 1,000 treas. sh.) 6. If the corporation gives Ian a note instead of cash for his shares: Assets $ Liabilities $ Equity Stated Capital Surplus (fn: incl. 1,000 treas. sh.) If the corporation incurs other liabilities, is Ian in as favorable a position as any other creditor? (See BOC 21.308(a)) As the note becomes due and payable in the future, will the corporation be prohibited from making a payment on the note if the amount of the payment exceeds the amount of surplus at the time, i.e., is each note payment treated as a distribution? (See BOC 21.315(b)(1)) 7. If the corporation cancels the treasury shares (See BOC 21.252(a), (b)): Assets Liabilities $ Equity Stated Capital Surplus 8. If the corporation then pays Ashley and Dallas a 1 for 1 share dividend out of authorized but unissued shares of common stock (See BOC 21.310, 21.311(1), 21.313(a)): Assets Liabilities $ Equity Stated Capital Surplus 9. If the corporation paid Ashley and Dallas a share dividend of 1,000 shares out of the treasury shares purchased from Ian rather than cancelling the shares (i.e., go to results in example no. 5 or 6 and show result of payment of treasury shares as dividend thereafter rather than cancellation of such shares): Assets Liabilities $ Equity Stated Cap Surplus
