CAL Exercise 170 a-e The stockholders\' equity section of Fauberg Marigny Corpor
ID: 2330366 • Letter: C
Question
CAL Exercise 170 a-e The stockholders' equity section of Fauberg Marigny Corporation at December 31 is as follows. FAUBERG MARIGNY CORPORATION Balance Sheet (partial) Stockholders' equity Paid-in capital Preferred stock, cumulative, 10,000 shares authorized, 5,000 shares issued and outstanding $300,000 Common stock, no par, 750,000 shares authorized 300,000 shares issued Total paid-in capital 1,500,000 1,800,000 2,050,000 3,850,000 (64,000) $3,786,000 Retained earnings Total paid-in capital and retained earnings Less: Treasury stock (5,000 common shares) Total stockholders' equity From a review of the stockholders' equity section, answer the following questions. How many shares of common stock are outstanding? Outstanding shares sharesExplanation / Answer
1. No of outstanding shares or stock= no of issued shares - no of treasury shares.
Hence, outstanding common stock will be as calculated below.
No of common stock issued= 3,00,000
Less: Treasury stock= 5,000
No of common stock outstanding= 2,95,000
2. Stated value of the common stock:
Normally accounting for no-par stock with a stated value is done as below.
"Common stock account" to be credited to the extent of stated value. "Paid in capital in excess of stated value" account to be credited with amount in excess of stated value.
Here in the given balance sheet, there is no "paid in capital in excess of stated value" account. Hence, it can be considered that amount of 15,00,000 is stated value. Hence stated value per stock is 15,00,000/3,00,000= 5 per share. Total stated value = 15,00,000.
3. Par value of preferred stock:
The par value of a share of preferred stock is the amount upon which the associated dividend is calculated.
Hence par value = 3,00,000/5,000= 60 per share
4. Dividend rate on preferred stock= 18,000/5,000= 3.6 per share. Rate= (3.6/60)*100= 6%.
5. If there is arrears of preferred dividend of 36,000, then retained earnings balance = 20,50,000-36,000= 20,14,000.
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