The stockholders’ equity section of Leyland Corporation’s balance sheet at Decem

Question

The stockholders’ equity section of Leyland Corporation’s balance sheet at December 31 is presented here. LEYLAND CORPORATION Balance Sheet (partial) Stockholders’ equity Paid-in capital Preferred stock, cumulative, 10,833 shares authorized, 6,500 shares issued and outstanding $ 676,000 Common stock, no par, 716,638 shares authorized, 554,200 shares issued 2,771,000 Total paid-in capital 3,447,000 Retained earnings 1,188,400 Total paid-in capital and retained earnings 4,635,400 Less: Treasury stock (7,120 common shares) (37,973 ) Total stockholders’ equity $4,597,427 From a review of the stockholders’ equity section, answer the following questions. (a) How many shares of common stock are outstanding? Common stock outstanding shares (b) Assuming there is a stated value, what is the stated value of the common stock? The stated value of the common stock $ per share (c) What is the par value of the preferred stock? The par value of the preferred stock $ per share (d) If the annual dividend on preferred stock is $54,080, what is the dividend rate on preferred stock? The dividend rate % (e) If dividends of $76,300 were in arrears on preferred stock, what would be the balance reported for retained earnings? The Retained Earnings balance $

Explanation / Answer

Answer

(a) Common stock issued 554200

Less Treasury stock 7120

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Common stock outstanding 547080

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(b) Stated value of common stock

Common Stock issued value /no. of common stock = 2771000/554200 = $ 5

Stated Value of common stock is $ 5

(c) Par Value of preferred stock

Preferred stock  issued value/no. of Preferred stock

= 676000/6500 = $ 104

(d) Dividend Rate on preferred stock

Dividend / no. of preferred stock

= 54080/6500 = 8.32 per stock

in term of %

8.32/104*100 = 8%

(e) Retained earning should be show as $ 1188400

. Arrear of dividend on preferred stock should be shown in balance sheet as footnote with payment plan.   

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