Expert answer:separate legal entity

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Megan
10/12/2017 11:31:22 PM
Week 8 Discussion
• Being defined as a separate legal entity allows a corporation to act a legal person. This
means they are recognized as having legal rights and obligations. Corporations can
exercise human rights against individuals and the state as well as being held responsible
for human rights violations. A corporation also has the right to enter into legal contracts,
to sue and to be sued, loan and borrow money, hire employees, own assets, and pay taxes.
•
In my opinion I would choose common stock with a par value of $5 per share because it
is less money to invest in.
30,000 shares of stock will be outstanding and the approximate market price per share would
be $40.
30,000 shares of stock will be outstanding and the approximate market price per share would
be $40.
•
30,000 shares of stock will be outstanding and the approximate market price per share would
be $40.
There is no effect on net income and on total paid-in capital. The total assets and total stockholders
equity decreases.
Comment:
Vanessa
10/12/2017 10:16:45 PM
Week Eight Discussion Forum
1. A corporation is separate legal entity because the owners of the business face no personal liability
for the corporations debts.
2. Given the fact that the par value of the stock has no relation to the market value and the par value
arbitrary assigned originally, it is not possible to determine which stock would be a better investment.
3. A 3 to 1 stock spilt will result in each outstanding share being replaced with 3 new shares. In the
example above, the 10,000 shares will result in a 30,000 outstanding shares and the market price will
change from $120 per share to $40 per share in order to keep the market capitalization the same.
4. A.) No impact.
B.) Assets will decrease because cash will be paid out for the amount of 11,000.
C.) No impact.
D.) Total stockholders equity will increase by 11,000 reflecting the purchased treasury shares.
Comment:
Lisa
10/12/2017 8:18:50 PM
Week 8 Discussion
A corporation has been defined as an entity separate and distinct from its owners. In what
ways is a corporation a separate legal entity?
A corporation is a separate legal entity by the following: It can have one or more owners called
stockholders. Stockholders are not held liable for any of the corporation’s debts. Stockholders are not
able to bind the corporation to a contract. A corporation has an indefinite life, and it can only
terminate by the decision of the business. Corporations are separate taxable entities, meaning that
they are required by the federal government as well as state government to pay income tax on their
net income. Lastly, corporations are able to raise more money than sole proprietorships and
partnerships which is done through an IPO.
Which is a better investment, in your opinion, 1) common stock with a par value of $5 per
share or 2) common stock with a par value of $20 per share?
I think that the par values should have no effect on the investment decision. So, either stock
mentioned could be the better investment. For instance if you were wanting to pay less for a share,
you could go with the $5 par value for a cheaper investment or $20 for a more pricey investment.
Keane Corporation has 10,000 shares of $15 par value common stock outstanding when it
announces a 3-for-1 split. Before the split, the stock had a market price of $120 per share.
After the split, how many shares of stock will be outstanding, and what will be the
approximate market price per share?
The shares of stock that will be outstanding = 10,000 x 3 = 30,000 shares.
The approximate market price per share = $120/3 = $40.
ABC, Inc. purchases 1,000 shares of its own previously issued $5 par common stock for
$11,000. Assuming the shares are held in the treasury, what effect does this transaction
have on (a) net income, (b) total assets, (c) total paid in capital, and (d) total stockholders’
equity?
a. no effect on net income
b. decreases total assets
c. has no effect on total paid-in capital
d. decreases total stockholders’ equity
Comment:
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