Capital balances

Letterman, Leno, and Carson all are partners in the WB Company and have the following amounts of capital: Letterman, $120,000; Leno; $80,000; and Carson, $100,000. The partners currently share all profits and losses equally but are considering allocating profits and losses in a ratio of beginning capital balances.

Required:

Show how income of $100,000 and a loss of $30,000 would be allocated under the current plan and the proposed plan. Determine the projected ending capital balances.

Washington Corporation has 1,000,000 shares of common stock issued and outstanding with a $1 par value. If Washington declares a one-for-four reverse stock split, how many shares will be issued and outstanding and what will the par value be after the split?

Alpha, Inc., has 250,000 shares of $1 stated value common stock issued and outstanding. The stock has a market value of $32 per share on October 14 when the board of directors is considering a 10 percent stock dividend to holders of record on October 20. If the board declares the dividend, the new shares will be issued on November 1.

Explain the impact of the proposed stock dividend on Alpha issued and outstanding stock.

Solution:

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