The balance sheet of Lamont Bros. follow: (a) What portions of Lamont's assets were provided by debt,
Question:
The balance sheet of Lamont Bros. follow:
(a) What portions of Lamont's assets were provided by debt, contributed capital, and earned capital? Reduce contributed capital by the cost of the treasury stock.
(b) Compute the company's debt/equity ration if the preferred stock issuance was classified as a long-term debt.
(c) In most states, to what dollar amount of dividends would the company be limited?
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY S 85,000 315,000 S 52,000 35,000 50,000 80,000 Current assets Noncurrent assets Current liabilities Long-term note payable Preferred stock Common stock Additional paid-in capital: Preferred stock 50,000 Common stock 100,000 113,000 (80,000) Retained earnings Less: Treasury stock Total liabilities and shareholders' equity Total assets S400,000 $400,000
Step by Step Answer:
a Debt Total Liabilities 52000 35000 87000 Contributed Capital Preferred Stock Common Stock Addition...View the full answer
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Treasury stock refers to shares of a company\'s own stock that the company has bought back from its shareholders and now holds as a form of asset on its balance sheet. When a company buys back its own stock, it reduces the number of outstanding shares in the market, which can potentially increase the value of the remaining shares. Treasury stock can be acquired through a variety of methods, such as open market purchases, negotiated transactions, or as a result of converting convertible securities. Companies may buy back their own shares for a number of reasons, including to return capital to shareholders, to signal confidence in the company\'s future, or to use the shares for employee stock option plans. While treasury stock does not pay dividends, it can be reissued by the company at a later time, which could dilute the value of the remaining shares. Companies are required to report their treasury stock holdings in their financial statements.
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