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What is the effect on earnings per share

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Question 1 - Fifo Inc. raises $4 million dollars by issuing shares of common stock. The market rate of interest is 10% at the time of issue. Assuming a corporate income tax rate of 30%, 100,000 common shares issued, and an increase in net income of $1,000,000 due to the additional resources, what is the effect on earnings per share?

a. $40 increase

b. $28 increase

c. $4.20 increase

d. $7 increase

Question 2 - Loretta Inc. issues 2,000 shares of preferred stock in exchange for land and building that have a fair value of $50,000 and $80,000 respectively. What is included in the journal entry to record this transaction?

a. A debit to Land and Building for $130,000

b. A debit to Land for $80,000

c. A credit to Preferred Stock for $130,000

d. A credit to Preferred Stock for $2,000

Reference no: EM132461861

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