50.1K

Verified Solution

Link Copied!

1. The stockholders equity section of Gum Corporation at December 31 is as follows:

GUM CORPORATION

Balance Sheet (partial)

Paid-in capital

Preferred stock, cumulative, 10,000 shares authorized, 6,000 shares issued and outstanding $ 600,000

Common stock, $2 par, 750,000 shares authorized, 500,000 shares issued 1,000,000

Paid-in capital in excess of par common 200,000

Total paid-in capital 1,800,000

Retained earnings 1,858,000

Total paid-in capital and retained earnings 3,658,000

Less: Treasury stock (12,000 common shares) 64,000

Total stockholders equity $3,594,000

Instructions:

From a review of the stockholders equity section, answer the following questions:

(a) How many shares of common stock are outstanding?

(b) At what average price per share was the common stock issued?

(c) What is the par value of the preferred stock?

(d) If the annual dividend on preferred stock is $36,000, what is the dividend rate on preferred stock?

(e) If dividends of $72,000 were in arrears on preferred stock, what would be the balance in Retained Earnings?

2. On January 1, An&Da Corporation had 100,000 shares of no-par common stock issued. 5,000 shares are held as treasury stock. The stock has a stated value of $5 per share. During the year, the following occurred.

Apr. 1 Issued 12,000 additional shares of common stock for $18 per share.

June 15 Declared a cash dividend of $1 per share to stockholders of record on June 30.

July 10 Paid the $1 cash dividend.

Dec. 1 Purchased 2,000 additional shares of common stock for $17 per share.

15 Declared a cash dividend on outstanding shares of $1.20 per share to stockholders of record

on December 31.

Instructions:

(a) Prepare the entries, if any, on each of the three dividend dates.

(b) How are dividends and dividends payable reported in the financial statements prepared at December 31?

3. Richard Tandy Company reported the following balances at December 31, 2013: common stock $500,000; paid-in capital in excess of par-common stock $200,000; retained earnings $350,000. During 2014, the following transactions affected stockholders equity.

1. Issued preferred stock with a par value of $200,000 for $230,000.

2. Purchased treasury stock (common) for $70,000.

3. Earned net income of $240,000.

4. Declared and paid cash dividends of $86,000 ($16,000 preferred).

Instructions:

Prepare the stockholders equity section of Richard Tandy Companys December 31, 2014, balance sheet.

4. A corporation had the following stock outstanding when the company's board of directors declared a $55,000 cash dividend during the current year:

Preferred stock, $10 par, 4%, 50,000 shares issued	$500,000
Common stock, $1 par, 750,000 shares issued	750,000
Total	$1,250,000

Instructions:

Allocate the cash dividend between the preferred and common stockholders assuming the preferred stock is cumulative and dividends are one year in arrears.

Discussion Question:

1. The corporate charter of Gage Corporation allows the issuance of a maximum of 100,000 shares of common stock. During its first 2 years of operation, Gage sold 70,000 shares to shareholders and reacquired 4,000 of these shares. After these transactions, how many shares are authorized, issued, and outstanding?

2. Which is the better investmentcommon stock with a par value of $5 per share or common stock with a par value of $20 per share?

3. What three conditions must be met before a cash dividend is paid?

4. Jayne Corporation has 10,000 shares of $15 par value common stock outstanding when it announces a 3-for-1 split. Before the split, the stock had a market price of $120 per share. After the split, how many shares of stock will be outstanding, and what will be the approximate market price per share?

Answer & Explanation Solved by verified expert

See Answer