applies to the questions The stockholders\' equity section of Velcro World is pr

Question

applies to the questions The stockholders' equity section of Velcro World is presented here. VELCRO WORLD Balance Sheet (partial) ($ and shares in thousands) Stockholders' equity: Preferred stock, $1 par value Common stock, $1 par value Additional paid-in capital 5,900 29,000 1,095,200 Total paid-in capital Retained earnings Treasury stock, 10,000 common shares 1,130,100 287,000 (310,000) Total stockholders' equity $ 1,107100 Based on the stockholders equity section of Velcro World, answer the following questions. Remember that all amounts are presented in thousands.

Explanation / Answer

Question: The stockholders’ equity section of Velcro World is presented here VELCRO WORLD Balance Sheet (partial) ($ and shares in thousands) Stockholders' equity: Preferred stock, $1 par value $                                                                   5,900 Common stock, $1 par value 29,000 Additional paid-in capital 1,095,200 Total paid-in capital $                                                           1,130,100 Retained earnings 287,000 Treasury stock, 10,000 common shares -310,000 Total stockholders' equity $                                                           1,107,100 13 Required 1. How many shares of preferred stock have been issued? 14 Required 2. How many shares of common stock have been issued? 15 Required 3. If the common shares were issued at $29 per share, at what average price per share were the preferred shares issued? 16 Required 4.If retained earnings at the beginning of the period was $249 million and $29 million was paid in dividends during the year, what was the net income for the year? 17 Required 5. What was the average cost per share of the treasury stock acquired? Solution: Requirement 1 5,900,000 shares = $5,900/$1 par value per share in thousand ((x 1,000). 5900*1000 = 5,900,000 Number of Shares = 5,900,000 5,900,000 shares of preferred stock have been issued Requirement 2 29,000,000 shares = ($29,000 / $1 par value per share) in thousands (x 1,000). 29000*1000 = 29,000,000 Number of Shares = 29,000,000 29,000,000 shares of common stock have been issued Requirement 3 $49 per share. The total paid-in capital for common stock is $841,000 (29,000 x $29). Therefore, the total paid-in capital for preferred stock must be $289,100 ($1,130,100 – $841,000). $289,100 divided by 5,900 shares indicates an issue price of $49 per share. Preffered shares issued price $49 per share Requirement 4 (in millions) Retained earnings, beginning $                                                                       249 Add: (+) Net income -67 Less : (–) Dividends -29 Retained earnings, ending $                                                                       287 Net income = Retained earnings, beginning - Dividends -Retained earnings, ending 249-29-287 = (67) million Net Income = 67million Net income for the year was $67 million. Requirement 5 $31 was the average cost per share of the treasury stock acquired ($310,000 / 10,000 shares) = $31 per share Average cost $31 per share

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