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Three different plans for financing a $30,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income.
Plan 1
Plan 2
Plan 3
8% bonds
-
$20,000,000
Preferred $2 stock, $50 par
10,000,000
Common stock, $10 par
$40,000,000
20,000,000
Total
Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $20,000,000.
2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $2,600,000.
3. Discuss the advantages and disadvantages of each plan.
In year 1 Laylor Company has revenues of $100,000, advertising expense of $22,000, depreciation of $15,000-what is expected for last four years. The cost of capital is 10%.
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Show the loan in the balance sheet of the company
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Include tests of transactions after the balance sheet date as well as tests of transactions during the year under audit. Show
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You are auditing Diverse Carbon, a manufacturer of nerve gas for the military-The company’s legal counsel indicates that the company is liable, but the company does not want to disclose this information in the financial statements.
During 2012, Harry, a self-employed accountant, travels from Kansas City to Miami for a 1-week business trip.
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