The Following Transactions Apply to the Garber Corporation for Year

question 46

Essay

The following transactions apply to the Garber Corporation for Year 1, its first year in business.
1)Issued stock to investors, $48,000.
2)The company borrowed $42,000 cash from the bank.
3)Services were provided to customers and $50,000 cash was received.
4)The company acquired land for $44,000.
5)The company paid $34,000 rent for the building where it does its business.
6)The company paid $3,200 for supplies that were used during the period.
7)The company sold the land acquired in item 5 for $44,000.
8)A dividend of $1,000 was paid to the owners.
9)Repaid $20,000 of the loan described in item 2.
Required:
a)Prepare an income statement, statement of changes in equity, and balance sheet for Year 1.
b)Prepare a statement of cash flows for Year 1.

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Definitions:

Common Share Equity

The amount of money that would be returned to shareholders if a company's assets were liquidated and all its debts repaid, representing ownership in a corporation.

Dividend Income

Income received from owning shares in a company, typically distributed from the company's profits.

Target Capital Structure

The optimal mix of debt, preferred stock, and common equity that a company aims to achieve for financing its operations and growth.

Weighted Average Cost

This is often used in the context of 'Weighted Average Cost of Capital (WACC)', which measures a company's cost of capital from all sources weighted by their relative use in the financial structure.