2.99 See Answer

Question: Look at Tables 4.1 and 4.

Look at Tables 4.1 and 4.2 together. What is the total surplus if Bob buys a unit from Carlos? If Barb buys a unit from Courtney? If Bob buys a unit from Chad? If you match up pairs of buyers and sellers so as to maximize the total surplus of all transactions, what is the largest total surplus that can be achieved?
 Look at Tables 4.1 and 4.2 together. What is the total surplus if Bob buys a unit from Carlos? If Barb buys a unit from Courtney? If Bob buys a unit from Chad? If you match up pairs of buyers and sellers so as to maximize the total surplus of all transactions, what is the largest total surplus that can be achieved?

 Look at Tables 4.1 and 4.2 together. What is the total surplus if Bob buys a unit from Carlos? If Barb buys a unit from Courtney? If Bob buys a unit from Chad? If you match up pairs of buyers and sellers so as to maximize the total surplus of all transactions, what is the largest total surplus that can be achieved?





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TABLE 4.2 Producer Surplus (2) (3) Minimum Actual Price (4) (1) Acceptable Price (Equilibrium Price) Producer Person Surplus Carlos $3 $8 $5 (= $8- $3) Courtney 4 8. 4 (= $8 - $4) Chuck 3(= $8- $5) 2 (= $8 - $6) 8. Cindy 6 8. 1 (= $8 - $7) 0 (= $8- $8) Craig 7 8. Chad 8. 8.


> What is done to record properly a transaction involving the issuance of a non-interest-bearing long-term note in exchange for property?

> Wilco Corporation has the following account balances at December 31, 2012. Common stock, $5 par value …………………………………………….. $ 510,000 Treasury stock …………………………………………………………………….. 90,000 Retained earnings ………………………………………………………….. 2,340,000 Paid-in capital in

> Swarten Corporation issued 600 shares of no-par common stock for $8,200. Prepare Swarten’s journal entry if (a) The stock has no stated value, and (b) The stock has a stated value of $2 per share.

> Buttercup Corporation issued 300 shares of $10 par value common stock for $4,500. Prepare Buttercup’s journal entry.

> Why is the distinction between paid-in capital and retained earnings important?

> Distinguish between common and preferred stock.

> For what reasons might a company restrict a portion of its retained earnings?

> This comment appeared in the annual report of MacCloud Inc.: “The Company could pay cash or property dividends on the Class A common stock without paying cash or property dividends on the Class B common stock. But if the Company pays any cash or property

> The following comment appeared in the notes of Colorado Corporation’s annual report: “Such distributions, representing proceeds from the sale of Sarazan, Inc., were paid in the form of partial liquidating dividends and were in lieu of a portion of the Co

> Stock splits and stock dividends may be used by a corporation to change the number of shares of its stock outstanding. (a) What is meant by a stock split effected in the form of a dividend? (b) From an accounting viewpoint, explain how the stock split ef

> Dividends are sometimes said to have been paid “out of retained earnings.” What is the error, if any, in that statement?

> Distinguish between the following interest rates for bonds payable: (a) Yield rate. (b) Nominal rate. (c) Stated rate. (d) Market rate. (e) Effective rate.

> What factors influence the dividend policy of a company?

> Indicate how each of the following accounts should be classified in the stockholders’ equity section. (a) Common Stock (b) Retained Earnings (c) Paid-in Capital in Excess of Par—Common Stock (d) Treasury Stock (e) Paid-in Capital from Treasury Stock (f)

> Satchel Inc. purchases 10,000 shares of its own previously issued $10 par common stock for $290,000. Assuming the shares are held in the treasury with intent to reissue, what effect does this transaction have on (a) Net income, (b) Total assets, (c) Tota

> List possible sources of additional paid-in capital.

> Where in the financial statements is preferred stock normally reported?

> Dagwood Inc. recently noted that its 4% preferred stock and 4% participating preferred stock, which are both cumulative, have priority as to dividends up to 4% of their par value. Its participating preferred stock participates equally with the common sto

> What features or rights may alter the character of preferred stock?

> Discuss the propriety of showing: (a) Treasury stock as an asset. (b) “Gain” or “loss” on sale of treasury stock as additions to or deductions from income. (c) Dividends received on treasury stock as income.

> For what reasons might a corporation purchase its own stock?

> Explain how underwriting costs and accounting and legal fees associated with the issuance of stock should be recorded.

> Assume the bonds in IFRS14-3 were issued for $644,636 and the effective-interest rate is 6%. Prepare the company’s journal entries for (a) The January 1 issuance, (b) The July 1 interest payment, and (c) The December 31 adjusting entry In IFRS14-3 On Ja

> What are the different bases for stock valuation when assets other than cash are received for issued shares of stock?

> Explain the difference between the proportional method and the incremental method of allocating the proceeds of lump-sum sales of capital stock.

> Describe the accounting for the issuance for cash of no-par value common stock at a price in excess of the stated value of the common stock.

> What is meant by par value, and what is its significance to stockholders?

> Explain each of the following terms: authorized capital stock, unissued capital stock, issued capital stock, outstanding capital stock, and treasury stock.

> If a company chooses to purchase its own shares and then either (1) Retires the repurchased shares and issues additional shares, or (2) Resells the repurchased shares, can a gain or loss be recognized by the company? Why or why not?

> A company plans to issue shares and wants to know the SEC’s stance on the accounting treatment for the costs of issuing stock. Can these costs be deferred, or must they be expensed immediately?

> At what percentage point can the issuance of additional shares still qualify as a stock dividend, as opposed to a stock split?

> Access the glossary (“Master Glossary”) to answer the following. (a) What is a “convertible security”? (b) What is a “stock dividend”? (c) What is a “stock split”? (d) What are “participation rights”?

> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://corporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010. Instructions Refer to M&S’s financial statem

> On January 1, 2012, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,224, and pay interest each July 1 and January 1. Prepare the company’s journal entries for (a) The January 1 issuance, (b) The July 1 interes

> Recall from Chapter 13 that Hincapie Co. (a specialty bike-accessory manufacturer) is expecting growth in sales of some products targeted to the low-price market. Hincapie is contemplating a preference share issue to help finance this expansion in operat

> Teller Corporation’s post-closing trial balance at December 31, 2012, was as follows. At December 31, 2012, Teller had the following number of ordinary and preference shares. The dividends on preference shares are $4 cumulative. In

> Weisberg Corporation has 10,000 shares of $100 par value, 6%, preference shares and 50,000 ordinary shares of $10 par value outstanding at December 31, 2012. Instructions Answer the questions in each of the following independent situations. (a) If the p

> Ravonette Corporation issued 300 shares of $10 par value ordinary shares and 100 shares of $50 par value preference shares for a lump sum of $13,500. The ordinary shares have a market price of $20 per share, and the preference shares have a market price

> Wilco Corporation has the following account balances at December 31, 2012. Share capital—ordinary, $5 par value …………………………. $ 510,000 Treasury shares ……………………………………………………………. 90,000 Retained earnings ……………………………………………………. 2,340,000 Share premium—ordinary

> Kaymer Corporation issued 300 shares of $10 par value ordinary shares for $4,500. Prepare Kaymer’s journal entry.

> Indicate how each of the following accounts should be classified in the equity section. (a) Share Capital—Ordinary (b) Retained Earnings (c) Share Premium—Ordinary (d) Treasury Shares (e) Share Premium—Treasury (f) Share Capital—Preference (g) Accumulate

> Explain each of the following terms: authorized ordinary shares, unissued ordinary shares, issued ordinary shares, outstanding ordinary shares, and treasury shares.

> Mary Tokar is comparing a GAAP-based company to a company that uses IFRS. Both companies report equity investments. The IFRS company reports unrealized losses on these investments under the heading “Reserves” in its equity section. However, Mary can find

> Briefly discuss the implications of the financial statement presentation project for the reporting of stockholders’ equity.

> What are the general rules for measuring and recognizing gain or loss by a debt extinguishment with modification?

> The following article appeared in the Wall Street Journal. Bond Markets Giant Commonwealth Edison Issue Hits Resale Market With $70 Million Left Over new york—Commonwealth Edison Co.’s slow-selling new 9¼% bonds were tossed onto the resale market at a re

> True or False: A market may collapse and have relatively few transactions between buyers and sellers if buyers have more information than sellers.

> Place an “M” beside the items in the following list that describe a moral hazard problem and an “A” beside those that describe an adverse selection problem. a. A person with a terminal illness buys several life insurance policies through the mail. b. A

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> Match each of the following characteristics or scenarios with either the term negative externality or the term positive externality. a. Overallocation of resources. b. Tammy installs a very nice front garden, raising the property values of all the other

> Use your demand schedule for a public good, determined in problem 5, and the following supply schedule to ascertain the optimal quantity of this public good. Q, $19 10 16 8 13 6. 10 4 7 4 1

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