tollowing ormauonI REQUIRED: Use Ashley Corporation\'s ledger includes the follo
ID: 2390998 • Letter: T
Question
tollowing ormauonI REQUIRED: Use Ashley Corporation's ledger includes the following account balances at December 31, 2011: the Accounts Payable Paid-in Capital in Excess of Par Value, Preferred Accumulated Depreciation Paid-in Capital in Excess of Par Value, Common Cash Retained Earnings Dividends Payable Treasury Stock, Common, 2,000 shares Preferred Stock, 996 $100 par value, 5,000 shares issued Bonds Payable Common Stock, $1 par value, 200,000 shares issued 300,000 100,000 150,000 800,000 100,000 400,000 8,000 60,000 500,000 900,000 200,000 1. The balance sheet prepared at December 31, 2011, would report total paid-in-capital of: 2. The balance sheet prepared at December 31, 2011, would report total legal capital of 3. The balance sheet prepared at December 31, 2011, would report total stockholders' equity of 4. The number of common shares outstanding at December 31, 2011, would be the book value perc tarest cent) preferred stock (Round answer to nearest cent) on the 6. Assuming the Preferred Stock is "Cumulative" and preferred dividends are in arrears for 2010 (last year). If a total of $240,000 of dividends are available for distribution in 2011, how much would the common shareholders receive:Explanation / Answer
Solutions:
1. Total paid in capital means sum raised by issuing Shares of the company. It includes par value as well as premium in excess of par value of shares. It also includes preferred stocks and paid in capital from treasury stocks. In the given case study the balance shown in the treasury stocks are the bought back value of shares, this stocks have not been sold yet. So this should not be included in the paid in capital.
Total paid in capital = Paid in capital from common stocks (par value + premium) + Paid in capital from preferred stocks (par value + premium)
= (200000+800000) + (500000+100000)
= $ 1,600,000
2. Legal capital of a company means the sum of paid in capital from common and preferred stocks. It remains undisturbed by dividend or any other things. It is a reserve for the creditors to recover their debts in case of any default by the company.
Total legal capital = Par value of paid in capital from common stocks + Par value of paid in capital from preferred stocks.
=200000+500000
= $ 700,000
3. Total stock holders' equity = Total paid in capital + Treasury stocks + Retained earnings
= 1600000+60000+400000
=$ 2,060,000
4. Outstanding common stocks means which are issued to the investors and are still held by them.. treasury stocks appearing in the balance sheet in this case study were bought back and had is still with the company.
Therefore total number of outstanding common stocks = 200000 shares.
5. Book value per common stock = common stock holders equity/number of outstanding common stocks
Common stock holders equity = Paid in capital from common stocks + Retained earnings
= 200000+800000+400000
= $1,400,000
Book value per common stocks = 1400000/200000
= $7
6. Preference shareholders dividend = (500000×9%)×2 = 90000
Common stock holders will receive = Available fund for dividend - preference dividend
= 240000 - 90000
=$ 150,000
** Please let me know if you have any doubt in any point of the solution. Your feedback will be highly appreciated. Thank You !
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