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A firm's balance sheets as of the December 31, 2015 and 2016 show the following items:...

A firm's balance sheets as of the December 31, 2015 and 2016 show the following items:

2015:

Cash = $9,916,500; Account Receivable = $9,000,000; Inventory = $4,500,000; Gross Fixed Assets = $10,972,000; Accumulated Depreciation = $1,243,000; Retained Earnings = $1,967,500; Capital Surplus = $8,600,000; Common Stock ($0.50 par) = $4,500,000; Notes Payable = $8,921,000; Long term debt = $2,500,000; Accounts Payable = $6,657,000.

2016:

Cash = $11,098,000; Account Receivable = $7,600,000; Inventory = $5,200,000; Gross Fixed Assets = $13,774,000; Accumulated Depreciation = $1,675,000; Retained Earnings = $1,967,500; Capital Surplus = $11,300,000; Common Stock ($0.50 par) = $4,800,000; Notes Payable = $7,773,000; Long term debt = $1,500,000; Accounts Payable = $6,132,000.

Calculate the total proceeds from sale of new shares in 2016.

A.

$3,000,000
B.

$2,700,000
C.

$600,000
D.

$300,000
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Answer #1

Option A is the right answer.

Increase in par value of stocks held = Closing common stock- Opening common stock

= 4800,000- 4500,000

= $ 300,000

Increase in capital surplus = Closing capital surplus – Opening surplus

= 11300,000 – 8600,000

=2,700,000

Net proceeds from sale of new stock = 300000+ 2700000

= 3,000,000

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