PLEASE PROVIDE A COMPLETE ANSWER Wallace Computer Company is a small, closely he
ID: 2424960 • Letter: P
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PLEASE PROVIDE A COMPLETE ANSWER
Wallace Computer Company is a small, closely held corporation. Eighty percent of the stock is held by Derek Wallace, president. Of the remainder, 10% is held by members of his family and 10% by Kathy Baker, a former officer who is now retired. The balance sheet of the company at June 30, 2014, was substantially as shown below.
Additional authorized common stock of $300,000 par value had never been issued. To strengthen the cash position of the company, Wallace issued common stock with a par value of $100,000 to himself at par for cash. At the next stockholders’ meeting, Baker objected and claimed that her interests had been injured.
Which stockholder’s right was ignored in the issue of shares to Derek Wallace?
How may the damage to Baker’s interests be repaired most simply?
Assets Liabilities and Stockholders’ Equity Cash $ 22,000 Current liabilities $ 50,000 Other 450,000 Common stock 250,000 $ 472,000 Retained earnings 172,000 $ 472,000Explanation / Answer
stockholder’s right was ignored in the issue of shares to Derek Wallace=
Right issue of share- Share should be offered to existing shareholders in proportion to existing persons who are holders of equity shares.
‘Right Issue’ means offering shares to existing members in proportion to their existing share holding. The object is, of course, to ensure equitable distribution of Shares and the proportion of voting rights is not affected by issue of Fresh shares
thus each shareholder have rights to acquire proportional additional common stock of company
Damage to Baker’s interests be repaired most simply By issuing additional number of share in proportion of what he is getting before issuing additional common stock.
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