Part 2 PROBLEMS/ESSAY DO 1a or 1b NOT BOTHccccccccccccrrc 1a. Ohtani Inc. has th
ID: 2594461 • Letter: P
Question
Part 2 PROBLEMS/ESSAY DO 1a or 1b NOT BOTHccccccccccccrrc 1a. Ohtani Inc. has the following information at December 31, 2017 Common Stock, $2 par value, 10,000 shares authorized and 5,000 shares issued; Preferred Stock, S 100 par value, 4% dividend, 1,000 shares authorized and issued. Additional paid-in capital was $150,000, retained earnings $300,000 and Treasury stock (common stock) $20,000 (1,000 shares) REQUIRED: Prepare in good form the stockholders' equity section of the Balance Sheet. 1b. (Essay) Explain in detail why it generally would not be proper to use a Planning Budget for erformance evaluation and feedback purposes. Three to four sentences should be sufficient.Explanation / Answer
1a: Stockholder's equity section of Balance sheet:
b. Planning budget is not appropriate for performance evaluation as well as for feedback purposes for the reason that planning budgets are prepared for a single as well as for a planned level of activity. When the actual activity is different from the planned level of activity (and this is generally the case) then performance evaluation becomes very difficult. In such a case instead of planning budget the use of flexible budgets is more appropriate. Flexible budgets can be prepared for any activity level and shows costs that would have incurred at the actual activity level. This enables a more ‘apples to apples’ cost comparisons, which is not possible in case of planning budgets.
Stockholder's equity Preferred stock - $100 par value, 4%; 1,000 shares authorized and issued 100,000.0 Common stock - $2 par; 10,000 shares aurhorized, 5,000 shares issued 10,000.0 Paid-in capital in excess of par value, common stock 150,000.0 Retained earnings 300,000.0 less: cost of treasury stock (20,000.0) Total stockholder's equity 540,000.0