List of Internship PWC HON 1 Multiple Choice Bb Content x o' Mail. ZHAO, Yanbo- Outlo A https://blackboard.cuhk.edu.hk/ultra/courses/ 132958 1/dl/outline O n Ftt KAN > I Assets Current: Cash Other current assets Non-current: $20,000 $30,000 at 31 December 2019 Liabilities: Non-current: Long-term debt* $40,000 Shareholder's Equity: 59 Preferred stock, $50 $50,000 par, cumulative, 1,000 shares outstanding Retained Earnings $10,000 Total Liabilities and Equity: $100,000 $50,000 PPE, net Total: $100,000 *the long-term debt incurs no interest in 2020, first installment payable in 2022. 1. Embarking on a massive expansion, the company decided to purchase a new office for $40,000. To fund the transaction, the manager of the company has prepared two plans. Plan 1 is to issue 4,000 common stock at $10 per share with par value $0.5 per share. Journalize the transaction. (3 points) 2. The company has $2,000 dividends in arrears as of 31 Dec 2019. If the common stock is issued according to Plan 1, and the company declares a cash dividend of $8,500 at the year end of 2020, how much dividend per share is paid to common stock owners? (2 points) 3. Plan 2 consists of borrowing from the bank at 8% per year interest rate. However, because the board of directors requires the manager to maintain the debt ratio to be not exceeding 50% for the company, the manager can only borrow to the threshold, and the remaining value will be funded by issuing common shares at the same price as in Plan 1. The manager finally decided to execute Plan 2, and the transaction is completed on 1 Feb 2020. Assume the company's income before interest expense is $10,000 and declares no dividend for the year 2020, calculate the net income and EPS (using number of shares at year end) for Plan 1 and Plan 2, and explain why the manager chose Plan 2 and why the board of directors set a limit for the debt ratio of the company. (8 points) 3112pt) v . = = . TTT Arial XTERAPIJE . i . PDF O E O e FC og D 9