Answer:
<u>Advantages</u>
Dividends
These are payments to shareholders as a way to share the profits the company has accumulated.
This is an advantage to the issuing company because they are usually not under any obligation to pay Dividends with respect to common Equity. As a result profits can be plowed back into the company to increase profitability.
Repaid
This refers to the fact that shareholders do not have to be repaid for their investment like debt holders are. Stock Holders bought a piece of the company instead of loaning money to the company so they do not have to be paid back. This is an advantage because it frees up Cashflow for the company as well as allowing it to maintain a better credit rating due to lower debts.
Future Buy-Back
This is a clause inherent in most shares. It means that the Issuing company can choose to buy back the stock at a given time in future.
This is an Advantage because it allows the Issuing company to regain control of the company at a future date.
<u>Disadvantages</u>.
Shareholders
Shareholders are people or entities who buy shares in the Issuing company. As such, they are owners in the company and have voting rights on decisions that the company makes. This is a disadvantage because it means loss of Independence for the company who now legally have to take the opinions of shareholders into account.
Net Profit After Tax
This is money that the company has after paying off interests and then taxes. This is the money that the company retains. Having shareholders means that a company may have to pay shareholders from this amount instead of retaining all of it thereby making it at a disadvantage to the Issuing company.
One Vote per Share
This means that every shareholder has a vote for every share they hold in the company. This means that Shareholders therefore have a say in the affairs of the company. This is a disadvantage to the Issuing company because it means a loss of Independence for them when decisions need to be made.
Answer:
Option D) 1,200 shares held at a cost basis of $37.50 per share
Explanation:
Data provided in the question:
Number of shares of ABC stocks purchased by the customer = 1,000
Price per share of ABC stock = $44
Commission paid = $1.00 per share
Stock dividend declared = 20%
Now,
The Payment of a stock dividend will increase the number of shares held by the investor
also,
each share is theoretically worth less after the stock dividend is paid.
Therefore,
The number of shares customer will have = Shares purchased × (1 + Dividend declared)
= 1000 × ( 1 + 0.20)
= 1200 shares
Also,
Cost basis for the share = Selling price + Commission
= $44 + $1
= $45
Thus,
The adjusted cost basis = $45 ÷ 1.20
= $37.50 per share
Hence,
Option D) 1,200 shares held at a cost basis of $37.50 per share
<span>B. Debt
</span>A credit<span> risk is the risk of </span>default<span> on a </span>debt<span> that may arise from a borrower failing to </span>make<span> required payments.</span>
Answer:
Cash Dr 10975
To Sales $10,000
To Sales Tax Payable $975 ($10,000 × 9.75%)
(Being the cash is recorded)
Explanation:
The journal entry is shown below;
Cash Dr 10975
To Sales $10,000
To Sales Tax Payable $975 ($10,000 × 9.75%)
(Being the cash is recorded)
For recording this we debited the cash as it increased the assets and credited the sales and sales tax payable as it also increased the revenue and liabilities
