Suppose the following financial information is available for Walgreen Company .

Question

Suppose the following financial information is available for Walgreen Company.

(in millions)

2017

2016

Calculate the payout ratio and return on common stockholders’ equity for 2017 and 2016. (Round answers to 1 decimal place, e.g. 12.5%.)

2017

2016

On January 1, 2017, Indigo Corporation had $1,240,000 of common stock outstanding that was issued at par and retained earnings of $826,000. The company issued 28,000 shares of common stock at par on July 1 and earned net income of $449,000 for the year.

Journalize the declaration of a 17% stock dividend on December 10, 2017, for the following two independent assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.

Account Titles and Explanation

Debit

Credit

(in millions)

2017

2016

Average common stockholders’ equity $13,010.0 $11,710.0 Dividends declared for common stockholders 555 400 Dividends declared for preferred stockholders 0 0 Net income 1,905 2,205

Explanation / Answer

1)Payout Ratio= Dividend/Net Income

For year 2017=555/1905= 29.1%

for year 2016= 400/2205= 18.1%

1b).Return on common stockholders’ equity = Net Income-Preferred dividend/Average common stockholders's Equity

For year 2017= 1905/13010=14.6%

For Year 2016= 2205/11710=18.8%.

2)

Par value is $10 and market price is $16. a Stock Dividend (21080*16) $ 337,280.00 Common Stock Dividend Distributable (21,080*10) $ 210,800.00 Paid in capital in excess of par-Common Stock (21,080*6) $ 126,480.00 No of Shares issued for stock dividend (1240000/10*17%) 21080 Shares Par value is $5 and market price is $9. b Stock Dividend (42160*9) $ 379,440.00 Common Stock Dividend Distributable (42160*5) $ 210,800.00 Paid in capital in excess of par-Common Stock (42160*4) $ 168,640.00 No of Shares issued for stock dividend (1240000/5*17%) 42160 Shares

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