Nicole has been financing Nicoles Getaway Spa (NGS) using equity financing. Currently NGS has authorized...
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Accounting
Nicole has been financing Nicoles Getaway Spa (NGS) using equity financing. Currently NGS has authorized 100,000 no-par preferred shares and 200,000 $2 par common shares. Outstanding shares include 51,000 preferred shares and 41,000 common shares.
Recently the following transactions have taken place.
a.
NGS issues 1,050 preferred shares for $11 a share.
b.
NGS repurchases 1,050 common shares for $10 a share.
c.
On November 12, the board of directors declares a $0.20 cash dividend on each outstanding preferred share.
d.
The dividend is paid December 20.
3.
Show the overall effect of each transaction on the assets, liabilities, and shareholders equity of the company. (Use + for increase, for decrease.) (Leave cell blank if there is no effect
Transaction
Balance Sheet
Assets
Liabilities
Stockholders' Equity
a.
b.
c.
d.
+
+11,550
4.
How would each transaction affect the ROE ratio? (Use + for increase, for decrease.) (Leave cell blank if there is no effect.)
Transaction
ROE
a.
b.
c.
d.
Answer & Explanation
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