CT15.1 The Shepersky Corporation

FratBro23
Category:
Accounting
Price: $5 USD

Question description

The Shepersky Corporation was authorized to issue 2,000,000 shares of $0.01 par value common stock and 200,000 shares of $50 par value, 10 percent preferred stock. To date, Shepersky has issued 600,000 shares of common stock and no preferred stock. Shepersky is contemplating the acquisition of a new piece of equipment and wants to issue stock to raise the $200,000 cash to finance its acquisition. The company is trying to decide whether to issue 10,000 shares of common stock or 4,000 shares of preferred stock.


  • A. Describe how the issue of each type of stock would affect the stockholders' equity of Shepersky Corporation.
  • B. If Shepersky generates about $3,600,000 of net income each year and the new machine can generate an additional $40,000 of after-tax income, how will the earnings of the common shareholders be affected if:
    • 1. Preferred stock is issued?
    • 2. Common stock is issued?

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(Top Tutor) Daniel C.
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