Explain to your friend how the “values”of the $1,100,000 total assets is determined.
A friend has come to you for advice.He states that he owns several shares of stock in a corporation.He has examined the most recent balance sheet of the corporation and has found that the common stock issued and outstanding totals 40,000 shares,and the market price per share is $25 on the balance sheet date.He is sure that the balance sheet must be in error because in his words “the total assets are $ 1,100,000 and this current value should be the same as the $ 1,000,000 total value of the outstanding common stock.”