Module 6 CCC11

Module 6 CCC11 - dividends for the year in which they are...

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1. Curtis’ Dad and Natalie’s grandmother are interested in investing $5,000 each in the new business venture. Curtis and Natalie are considering issuing them preferred shares. What would be the advantage of issuing them preferred stock instead of common? The biggest advantage of issuing preferred stock over common stock would be that preferred stockholders do not have voting ability. If Natalie’s business gave the investors, Curtis’s Dad and her Grandmother, preferred stock they would collect dividends from the business throughout its operational life but they would not have the ability to weigh in on issues that would normally involve stock holders. 2. What would be the advantages and disadvantages of issuing cumulative preferred? Advantages of cumulative preferred stock is the holder of the stock is given
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Unformatted text preview: dividends for the year in which they are declared and also for previous years that have been missed. Disadvantages of cumulative preferred stock is that these dividends have to be paid before common stock dividends are paid. 3. “Our lawyer sent us a bill for $750. When we talked the bill over with her, she said she would be willing to receive common stock in our corporation instead of cash. We would be happy to issue her stock, but we’re worried about accounting for this transaction. Can we do this? If so, how do we determine how many shares to give her?” Giving common stock as a payment is a possibility. The cost of the common stock it is determined by fair market value then just equal the debt amount with common stock....
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