Solved

A Firm Has 1,000 Shares of Common Stock Outstanding with a Par

Question 21

Multiple Choice

A firm has 1,000 shares of common stock outstanding with a par value of $15 per share. Upon liquidation, the firm has insufficient funds and requires an additional $5,000 to repay its creditors. Which of the following statements is true about the common shareholders' financial obligation?


A) If the share is purchased for $8, the stockholders are obligated to pay $2 per share to the creditors.
B) If the share is purchased for $20, the stockholders are obligated to pay interest equal to $15 per share to the firm.
C) If the share is purchased for $15, the stockholders are obligated to pay $15 per share to the bondholders.
D) If the share is purchased for $18, the stockholders are obligated to pay a dividend of $3 per share to the firm.
E) If the share is purchased for $10, the stockholders are obligated to contribute $5 per share to the firm.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents