The shareholders equity section of the statement of financial position of Dolce Corporation as at December 31,
Question:
The shareholders’ equity section of the statement of financial position of Dolce Corporation as at December 31, 2020, is given below:
Shareholders’ equity:
Preferred shares, $9 non-cumulative, unlimited authorized,
200,000 shares issued and outstanding ............................................ $ 5,000,000
Common shares, unlimited authorized, par value $30,
250,000 shares issued and outstanding ............................................. 7,500,000
Retained earnings .................................................................................. 4,500,000
Total shareholders’ equity .................................................................... $17,000,000
The board of directors for Dolce Corporation feels it is important that its shares trade at or below $50 per share in order to attract the maximum number of investors. The market price is currently $150 per share.
Required
a. What would you recommend to the board of directors in order to maintain the share price at $50 per share?
b. What would be the expected market price per share based on your recommendation in part “a” above?
c. Prepare the journal entry for your recommendation.
d. Prepare the shareholders’ equity section for Dolce Corporation immediately after your recommendation.
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Step by Step Answer:
Understanding Financial Accounting
ISBN: 9781119406921
2nd Canadian Edition
Authors: Christopher D. Burnley