Question

Review View Help Open in Desktop App Tell me what you want to do Editing 12 А" A B I U Av A A Ev Ev 三三 Styles Q3. a) Big Auto Part Inc. is authorized to issue 5,000,000 common shares. In its initial public offering during 2015, Big Parts issued 500,000 common shares for $7.00 per share. Over the next year, Big Auto Part's share price increased and the company issued 400,000 more shares at an average price of $8.50 During the five years from 2015 through 2019, Big Auto Part earned net income of $920,000 and declared and paid cash dividends of $140,000. A 10% stock dividend was distributed to the shareholders in 2015 on the shares outstanding. The market price was $8.00 per share when the stock dividend was distributed. At December 31, 2019, the company has total assets of $14,500,000 and total liabilities of $6,820,000. Requirement: Show the computation of Big Auto Part's total shareholders' equity at December 31, 2019. Present a detailed computation of each element of shareholders' equity. b) Identify and briefly describe four ways to improve cash flows from sales and receivables.

Answer 1

Solution:

Solution Option-1 Computation of Total Shareholder' Equity Issue Of Shares From 2015 to 2019 (500000*7) (400000*8.50) Total Issued Share Capital Stock Retained Earnings From 2015 to 2019 3,500,000.00 3,400,000.00 6,900,000.00 920,000.00 7,820,000.00 140,000.00 7,680,000.00 Less: Dividen Paid Option- 2 Total Assets Less: Toatl Liabilities 14,500,000.00 6,820,000.00 7,680,000.00