Which of the following is true regarding an initial public offering? - 3854

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Which of the following is true regarding an initial public offering?

a.The corporation gets proceeds from the investor.

b.Investors get proceeds from other investors.

c.The security is sold for the first time to the public.

d.Both a and c.

e.All of the above.

 

Table 1(Use this table for questions 5-8)

 

Smith Company Balance Sheet

 

Assets:

Cash and marketable securities                  $300,000

Accounts receivable                                        2,215,000

Inventories                                                        1,837,500

Prepaid expenses                                                     24,000

Total current assets                                             $3,286,500

Fixed assets                                                            2,700,000

Less: accumulated depreciation                          1,087,500

Net fixed assets                                                     $1,612,500

Total assets                                                            $4,899,000

Liabilities:

Accounts payable                                                     $240,000

Notes payable                                                           825,000

Accrued taxes                                                       42,500

Total current liabilities                                         $1,107,000

Long-term debt                                                           975,000

Owner’s equity                                                         2,817,000

Total liabilities and owner’s equity                     $4,899,000

Net sales (all credit)                                               $6,375,000

Less: Cost of goods sold                                          4,312,500

Selling and administrative expense                       1,387,500

Depreciation expense                                                  135,000

Interest expense                                                           127,000

Earnings before taxes                                                $412,500

Income taxes                                                                 225,000

Net income                                                                  $187,500

Common stock dividends                                            $97,500

Change in retained earnings                                       $90,000

 
Solution Description

1.            Which of the following is true regarding an initial public offering?

a.  The corporation gets proceeds from the investor.

b.  Investors get proceeds from other investors.

c.  The security is sold for the first time to the public.

d.Both a and c.

e.  All of the above.