Question
What effects will this have on the balance sheet: ? Option #1 - Buy .005% (=.00005 as a decimal} of the outstanding shares of Oxford
What effects will this have on the balance sheet: ?
Option #1- Buy .005% (=.00005 as a decimal} of the outstanding shares of Oxford for $100,000 in cash on April 1, 2020. You would have planned to hold the shares for more than one year. On the acquisition date, all of their assets and liabilities were fairly valued except their patent which was undervalued (needs to be increased) by $2,000,000 with a five year remaining life. Oxford Company uses straight-line amortization.
During the last nine months of the year, Oxford Company earned $30,000,000 of net income and paid a total of $6,000,000 of cash dividends. On December 31, 2020, your shares of Oxford Company had a total market value of $106,000.
You would have sold 100 shares of new 5% PREFERRED stock on January 1, 2020, for
$61 per share in cash. At the beginning of 2019, you had received authorization for 2,000 shares of this $60 par nonconvertible, nonparticipating, cumulative preferred stock. Because your company paid cash dividends to common stockholders, you would have declared AND paid a full year cash dividend to preferred stockholders in 2020 as well.
On October 1, 2020, you would have also purchased $20,000 of 5 year, 9% bonds of ANOTHER Company for 102. These bonds pay interest annually on September 30. You would use the straight-line method of amortization. You plan to hold these bonds for more than one year but are not sure that you will hold them the entire five year life. On December 31, 2020, your bonds of ANOTHER Company had a market value of 103.
Please show how this will affect the balance sheet, and where it would be placed
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