Match each account used by Buttons Inc.

with the appropriate transaction

1.2
2.1
2.4
3.1
3.2
3.3
Journalize:

220,000
Common stock dividend distributable = 480,000
What is the difference while closing accounts in a corporation versus a partnership or sole
proprietorship
3.4
(100,000 shares outstanding)
3.5

Current liabilites

Long-term liability

Short-term asset

Long or short term liability

Property, planted, and/or equipment

How do these affect retained earnings?:
4.1
XYZ Company
Ownership in XYZ Company is represented by 200 000 shares of outstanding common
stock on which the corporation has earned an unsatisfactory average of $0.45 per share
during each of the last three years. As a result of the unsatisfactory earnings, the
company's management is planning an expansion that will require the investment of an
additional $2 000 000 in the business. The $2 000 000 is to be acquired either by selling
an additional 200 000 shares of the company's common stock at $10 per share or
selling bonds at par for $2 000 000, with an 8% interest rate. Management estimates
that the expansion will double the company's before-tax earnings by an additional 25%
over that level in the years that follow.
The company's management wants to finance the expansion in a way that will serve the
best interests of present stockholders, and they have asked you to determine this for
them. Complete the following table, and then give your opinion on which alternative is
preferable.

Issue shares Issue bonds

Income before interest and income tax 1,000,000 1,000,000

Interest expense

Income before income tax

Income tax expense (30%)

Net income

Issued shares

Earnings per share

4.2
4.4