WEEK 6 5020

Week 6 Saturday, April 15 (12:01 a.m.) to Friday, April 21 (11:59 p.m.)

Topics to research and review

 Balance Sheet—Equity o Chapters 42-49 o Total Liabilities and the Debt to Shareholders’ Equity Ratio o Shareholders’ Equity/Book Value o Preferred and Common Stock o Retained Earnings o Treasury Stock o Return on Shareholders’ Equity o Leverage

Summary of Assignments; Due Dates; and Points

 Problem/Case 2 o 50 Points o See specifics attached o Due Friday, April 21 at 11:59 p.m.

 Research Project Part 5 o 5 Points o See specifics attached o Due Friday, April 21 at 11:59 p.m.

Problem/Case 2

 Read Chapters 42 through 49. Walker Computer Company is a small, closely held corporation. Derek Wallace, president, holds 80% of the stock. Of the remainder, 10% is held by members of his family and 10% by Kathy Baker, a former officer who is now retired. The balance sheet of the company at June 30, 2020, was substantially as shown below.

Cash $ 22,000 Current Liabilities $ 50,000

Other assets 450,000 Common Stock 250,000

$ 472,000 Retained Earnings 172,000

$ 472,000

Additional authorized common stock of $300,000 par value has never been issued. To strengthen the cash position of the company, Walker issued common stock with a par value of $100,000 to himself at par for cash. At the next stockholders’ meeting baker objected and claimed that her interests had been injured.

a. Which stockholder’s right was ignored in the issue of the shares to Derek Walker? b. How may the damage to Baker’s interests be repaired most simply? c. If Derek Walker offered Baker a personal cash settlement and they agreed to employ you as an

impartial arbitrator to determine the amount, what settlement would you propose? Present your calculations with sufficient explanation to satisfy both parties.

d. How would your answer to c. above differ if Derek’s family members also objected?

Research Project Part 5

 Using the Balance Sheet and Notes for your company, answer the questions below:

1. Is this a Consolidated Balance Sheet? If so, name one of their subsidiaries. Is this a wholly- owned subsidiary?

2. What is the amount of Total Stockholders’ Equity? What is the debt to equity ratio?

3. What classes of stock do your companies have? Describe. Do your companies have Treasury Stock?

4. Did the company declare and pay a dividend in 2022?

5. What is the Retained Earnings amount for each company? Is this increasing from previous years?

6. Calculate return on equity. Describe what the differences between your two companies RoEs mean.

7. What is the: Price/earnings ratio? Dividend payout? Dividend yield? Market price of stock at year-end?