Chapter 14 Case Study Solutions

Case 1 Solution:  Recommend that the corporation prepare both a statement of stockholders' equity and a balance sheet.  On the balance sheet show only summary information from the statement of stockholder's equity.  This procedure will result in a shorter balance sheet which will be easier to read.

Case 2 Solution:  If Mr. Edwards is saving his money for sometime in the future, investing in the stock will likely be better.  The higher rate of return from dividends over several years will offset the broker's commissions when stock is bought and sold.  However, the full 6% interest on a savings account will be paid in each of the future years.  A stockholder has no assurance that a corporation will pay dividends in future years.