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Assignment 2 Homework Calculator Mastery Problemi CorporationsOrganization, Stock Transactions, and Dividends Pranks, Inc. Pranks, Inc. is a manufacturer of joke and novelty products for perpetrators of practical jokes. The corporation has paid several cash dividends throughout Year, the current year. It is declaring a stock dividend to its stockholders as the calendar year-end approaches. You've been brought in as a constant to assist with this process, and also to help determine whether some missing information can be determined before the distribution of the stock dividend is made. The company has two classes of stock common stock and cumulative preferred stock. Number of common shares authorized 900,000 Number of common shares issued 750,000 Par value of common shares $20 Par value of cumulative preferred shares $30 Paid-in capital in excess of par-common stock $7,000,000 Paid-in capital in excess of par preferred stock $0 Total retained earnings before the stock dividend is declared $33,500,000 No treasury share have been reissued. Preferred Dividends Common Dividends Total Cash Year Dividends Total Per Share Total Per Share Year 1 40,000 40,000 0.20 0 0.00 Year 2 72,000 0.36 0 Year 3 122,000 54,000 0.00 Year 4 150,000 60.000 03 90.000 0.15 Year 5 160,000 60,000 0.3 100,000 0.18 Year 5 240.000 60,000 03 180,000 72.000 0.00 0.34 Cash Dividends Previous Check My Work Suht Agent for Grading All work saved Assignment Score: 0.5% MacBook Air >>

Answer 1

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Answer Part 1 Number of Common Stock Outstanding 600,000 shares Number of Common Stock Outstanding Total Common Stock Dividend Paid in Year 6 Dividend Paid Per Share 180,000/ 0.3 600,000 shares Number of Preferred Stock Outstanding 200,000 shares Number of Preferred Stock Outstanding Total Preferred Dividend Paid in Year 6 Dividend Paid Per Share 60,000/0.3 200,000 shares Preferred Dividend as a Percent of Par 1% Preferred Dividend as a Percent of Par 100 Preferred Dividend Per Share Par Value (0.3/30) *100 1% Answer Part 2 1. Yes, because the number of shares issued (750,000) is greater than the number of shares outstanding (600,000). 2. The annual preferred dividend (200000 shares *$0.3) $ 60,000 The company paid a dividend of $80,000 in Year 1. The balance amount of $20,000 (200,000*0.30 - 40,000) in arrears for Year 1 is paid as follows: Year 2 = 72,000 - 60,000 = $12,000 Year 3 = 68,000 - 60,000 = $8,000 Answer Part 3 Total paid-in capital before stock dividend Total retained earnings before the stock dividend Total stockholder's equity before the stock dividend $ 25,000,000 $ 33,500,000 $ 55,500,000 Total paid-in capital after stock dividend Total retained earnings after the stock dividend Total stockholder's equity after the stock dividend $ 28,840,000 $ 33,188,000 $ 59,028,000 When stock dividend is less than 20-25%, it is treated as small stock dividend Stock dividend is declared on common stock outstanding Common stock issued (600,000 shares * 2%) 12000 shares Total paid-in capital before stock dividend: Common stock (750,000 * $20) Preferred stock (100,000 * $30) Paid-in capital in excess of par-common stock Paid-in capital in excess of par-preferred stock Total paid-in capital 15,000,000 3,000,000 $ 7,000,000 $ $ 25,000,000 The market value of common shares on Date of declaration is relevant and on the date of actual distribution is not relevant Total retained earnings before the stock dividend $ 33,500,000 Total stockholder's equity before the stock dividend Total paid-in capital + Total retained earnings - Treasury stock $25,000,000 + $33,500,000 - $3,000,000 $ 55,500,000 Number of shares in treasury stock Number of common shares issued - Number of common shares outstanding 750,000 - 600,000 150,000 Let's assume that treasury stock acquired at par value Treasury stock in $ 150,000 * $20 $3,000,000 Total paid-in capital after stock dividend Common stock (750,000 * $20) + 240,000 Preferred stock (100,000 * $30) Paid-in capital in excess of par-common stock ($7,000,000 + 3,600,000) Paid-in capital in excess of par-preferred stock Total paid-in capital 15,240,000 3,000,000 $ 10,600,000 $ $ 28,840,000 Stock divdend issued - (600,000 shares *2% *$20) $ 240,000 Market Value $ 26 Par Value $ 20 $ 6 Paid-in capital in excess of par-common stock in case of dividend declared 600000*$6 $3,600,000 Total retained earnings after the stock dividend Retained earnings before stock dividend $ Less: Stock dividend declared (600,000 shares *2% *$26) $ $ 33,500,000 312,000 33,188,000 Total stockholder's equity after the stock dividend Total paid-in capital Add : Total retained earnings Less: Treasury stock $ 28,840,000 $ 33,188,000 $ 3,000,000 $ 59,028,000