Southwest Corporation is authorized to issue an unlimited amount of common shares, and as at December 31,
Question:
Common Shares...............................$18,000
Retained Earnings..............................35,000
On January 1, 2014, Mah bills Southwest Corporation $5,000 for legal services. As Southwest Corporation has a limited amount of cash, Manji and MacDonald suggest to Mah that the corporation issue shares in exchange for the legal services instead of paying the bill in cash. After a series of negotiations, Mah agrees but wants a 10% ownership interest in the corporation.
Instructions
(a) How many shares would Southwest Corporation need to issue to Mah in order for Mah to have a 10% ownership interest?
(b) Assuming Southwest uses ASPE, prepare the journal entry to record the issue of shares. Include an explanation for the value used in the journal entry.
(c) Why might Manji and MacDonald not want to issue shares to Mah?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For
Accounting Principles Part 3
ISBN: 978-1118306802
6th Canadian edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow
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