Montana City Company Began Business on January 1,2017 $\begin{array}{cc} \text { Common Stock} & \text { Preferred Stock } \\\end{array}$

question 27

Short Answer

Montana City Company began business on January 1,2017.The corporate charter authorized issuance of 500 shares of $1 par value common stock and 400 shares of $4 par value,3% cumulative preferred stock.What is the maximum amount that can be reported on the balance sheet for Common Stock and Preferred Stock,respectively,if all of the stock is issued?
$\begin{array}{cc} \text { Common Stock} & \text { Preferred Stock } \\\end{array}$

a.
$\begin{array}{cc}&&&\$500 &&&&& \$1,600\\\end{array}$

b.
$\begin{array}{cc}&&&\$5,000 &&&&& \$120\\\end{array}$
c.
$\begin{array}{cc}&&&\$500 & &&&&& \$120\\\end{array}$

d. Not enough information provided.

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Definitions:

Accounts Receivable

The amount customers are required to pay a company for goods or services that have been provided but not yet compensated for.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to the business for day-to-day operations.

Current Assets

Assets expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business, whichever is longer.

Current Ratio

A financial metric assessing a firm's capacity to cover its short-term debts using assets due within the same period.