Project #63982 - Case Study

Shoffner, H. G., Shelly, S., & Cooke, R. A. (2011)

 

Chapter 7

When George, who built golf courses, bought his Automatic Sand Trap Machine for $100,000, he paid $20,000 of his own money and borrowed $80,000 from the Easy money National Bank. He borrowed the money on January 1 of year 1 and was to repay it in annual payments of $16,000 principal plus interest (10 percent), due on December 31. He made all payments before the due date. Determine how this liability should be divided between current and long-term liabilities on George’s balance sheet at the end of the second year.

Beginning balance of loan

Subtract payments made

Balance

Subtract current portion

 

Chapter 8

Gretchen’s Gimmicks and Gadgets Stores, Inc., is a growing chain of specialty shops scattered around the country. The company specializes in such goods as left-handed letter openers and water-cooled ear muffs. The corporation’s balance sheet last December 31 can be summarized as follows: Total assets $10,000,000 Total liabilities $ 4,000,000 Stockholders’ equity: Common stock: 1,000,000 shares of $2.00 par value shares issued and outstanding $2,000,000 Retained earnings 4,000,000Total stockholders’ equity 6,000,000. Equity $10,000,000 Net income last year was $1.5 million. The common stock is currently selling for $14 per share.

Compute the following: book value of the corporation and book value per share, value of the corporation if earnings are capitalized at 20 percent, and the capitalized value per share. Also, compute the market value of the entire corporation. Here is a format you can use:

Book value of the corporation _______

Book value per share=

_______÷_______=

 

Value of the corporation by capitalizing earnings at 20 percent

_______ ÷_______=_______

 

Capitalized earnings value per share

_______÷_______=_______

 

Market value of the whole corporation

_______x_______=

Subject Business
Due By (Pacific Time) 03/29/2015 12:00 am
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