Question

The balance sheet of Consolidated Paper, Incorporated, included the following shareholders’ equity accounts at December 31, 2023:

Paid-in capital:
Preferred stock, 7.5%, 98,000 shares at $1 par $ 98,000
Common stock, 484,800 shares at $1 par 484,800
Paid-in capital—excess of par, preferred 1,595,000
Paid-in capital—excess of par, common 2,645,000
Retained earnings 9,745,000
Treasury stock, at cost; 4,800 common shares (52,800)
Total shareholders' equity $ 14,515,000
During 2024, several events and transactions affected the retained earnings of Consolidated Paper.

Required:
Prepare the appropriate entries for these events:
On March 3, the board of directors declared a property dividend of 290,000 shares of Leasco International common stock that Consolidated Paper had purchased in January as an investment (book value: $552,000). The investment shares had a fair value of $2 per share and were distributed March 31 to shareholders of record March 15.
On May 3, a 5-for-4 stock split was declared and distributed. The stock split was effected in the form of a 25% stock dividend. The market value of the $1 par common stock was $11 per share.
On July 5, a 1% common stock dividend was declared and distributed. The market value of the common stock was $11 per share.
On December 1, the board of directors declared the 7.5% cash dividend on the 98,000 preferred shares, payable on December 28 to shareholders of record December 20.
On December 1, the board of directors declared a cash dividend of $0.50 per share on its common shares, payable on December 28 to shareholders of record December 20.
Prepare the shareholders' equity section of the balance sheet for Consolidated Paper, Incorporated at December 31, 2024. Net

Required:
Note 20, “Share Repurchase,” provides the information we need to reconstruct the journal entry that summarizes Target’s share repurchases in the year ended February 1, 2020. Provide that entry.
Does Target account for share repurchases as (a) treasury stock or (b) retired shares?

Answer 1

To determine the price per share of Babble, Inc., calculate the present value of the expected future profits and divide by the number of shares. Using a 15% discount rate, the total present value of the future profits is $51.3 million, leading to a price of $256,500 per share.

Step-by-step explanation:

To calculate the price an investor would be willing to pay for a share of stock in Babble, Inc., we need to consider the present value (PV) of the expected dividends, which are the company's future profits. The firm plans to disband in two years, and the profits are expected to be distributed at the time they are earned. We will use a discount rate of 15% to compute the present value of the future dividends.

First, the present value of the immediate $15 million profit is $15 million because it is already in the present value. The formula for the present value of a future sum of money is PV = Future Value / (1 + r)^n where r is the interest rate and n is the number of periods.

Next, calculate the present value of the profits expected one year and two years from now. The PV for the $20 million at year one is $20 million / (1 + 0.15)^1, and the PV for the $25 million at year two is $25 million / (1 + 0.15)^2.

After computing the PV for each of these profits, we add them together to find the total present value of the company's future profits. Finally, divide this total by the number of shares to determine the price per share. Given 200 shares, the calculation is as follows:

• $15 million / 1 = $15 million (Immediate profit, already in present value)
• $20 million / (1 + 0.15)^1 = $17.39 million (One year from now)
• $25 million / (1 + 0.15)^2 = $18.91 million (Two years from now)

The total present value of the future profits is then $15 million + $17.39 million + $18.91 million = $51.3 million. Dividing this by the number of shares we get, $51.3 million / 200 = $256,500 per share.