Thus neitherthe percentage of shares owned nor the

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Unformatted text preview: tockholders' equity * $1,149,950 = $3,150,000 cash on hand + $4,000,000 cash borrowed –$6,000,050 cash paid out for stock d. Debt/Equity Ratio = Total Liabilities ÷ Total Stockholders' Equity Before $1,250,000 ÷ ($8,000,000 in Common Stock + $6,320,000 in Retained Earnings) = .087 A fte r $5,250,000 ÷ ($8,000,000 in Common Stock + $6,320,000 in Retained Earnings – $6,000,050 in Treasury Stock) = .631 The purchase of the treasury stock had a large effect on the company's financial position, as evidenced by the large increase in the company's debt/equity ratio. The actual purchase of the treasury stock reduced Edmonds' stockholders' equity by the value of the stock purchased. Since Edmonds financed the purchase by issuing debt, the purchase directly increased Edmonds' long­term debt by the $4,000,000 b o rro w e d . P12–14 a. Loss on Write­Down of Fixed Assets (Lo, –SE) 50,000 Fixed Assets (–A) 50,000 Wrote down obsolete fixed assets. b. Alternative 1 Cash (+A) 650,000 Current Assets (–A) 200,000 Fixed Assets (–A) 450,000 Liquidated assets. Cash...
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