Question

The following information was extracted from the records of Cascade Company at the end of the fiscal year after all adjusting entries were completed:

Common stock ($0.01 par value; 330,000 shares authorized, 60,500 shares issued, 58,500 shares outstanding)	$	605
Additional paid-in capital		469,000
Dividends declared and paid during the year		28,500
Retained earnings at the end of the year		325,000
Treasury stock at cost (2,000 shares)		(21,500	)

  

Net income for the year was $101,500. The stock price is currently $15 per share.

Required:

1. Prepare the stockholders’ equity section of the balance sheet at the end of the fiscal year. (in balance sheet form)
2. Compute the dividend yield ratio. Determine the number of shares of stock that received dividends.

Answer 1

1.
The stockholder's equity section of balance sheet is shown below
Cascade company
Balance sheet (Partial)
At December 31, Current year
Stockholder's equity:
Contributed capital:
Common stock ($0.01 par value; 330,000 shares authorized, 60,500 shares issued, 58,500 shares outstanding)	$605
Additional paid in capital	$469,000
Total contributed capital	$469,605
Retained earnings	$398,000
Total contributed capital and retained earnings	$867,605
Treasury stock at cost (2,000 shares)	-$21,500
Total stockholder's equity	$846,105
Calculation of retained earnings
Retained earnings at the end of the year	325000
Add: Net income	101500
Less: Dividend declared and paid	28500
Retained earnings, adjusted	398000
2.
Dividend yield ratio	Dividend declared/Market price per share
Dividend yield ratio	(28500/58500)/15
Dividend yield ratio	3.25%
3.
No of shares which would receive dividend	Total shares issued - Treasury shares
No of shares which would receive dividend	60500-2000
No of shares which would receive dividend	58500