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    Uzi Company: Stockholder's equity section, JEs, rationale

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    Uzi Company received a charter granting the right to issue 200,000 shares of $1 par value common stock and 10,000 shares of 8% cumulative and nonparticipating, $50 par value preferred stock that is callable at $80 per share. Selected transactions are presented below.

    Feb. 19 Issued 45,000 shares of common stock at par for cash.
    22 Gave the corporation's promoters 30,000 shares of common stock for their services in getting the corporation organized. The directors valued the services at $50,000.
    Mar 30 Exchanged 100,000 shares of common stock for the following assets at fair market values: land, $25,000; building, $100,000; and machinery, $125,000.
    Dec. 31 Closed the Income Summary account. A $25,000 loss was incurred.
    Jan. 12 Issued 1,000 shares of preferred stock at $75 per share.
    Dec. 15 The board of directors declared an 8% dividend on preferred shares and $0.10 per share on outstanding common shares, payable on January 31 to the January 17 stockholders of record.
    31 Closed the Income Summary account. A $69,000 net income was earned.
    Jan. 31 Paid the previously declared dividends.

    Prepare general journal entries to record the selected transactions.
    Prepare a stockholders' equity section as of the close of business on December 31, 2012.
    Determine the book value per preferred share and per common stock as of December 31, 2012.
    Provide a rationale between 200 and 300 words in length for buying or not buying this stock based on the financial information presented.

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    Solution Preview

    The company seems to have lots of capital but they lost money last year and made money this year. So, if they are a start ...

    Solution Summary

    See the JEs and stockholder equity section attached in Excel. Rationale discussed in a paragraph indicating that this is a risky investment and why.