Stockholders\' Equity (December 31, 2015) Common stock-$6 par value, 50,000 shar

Question

Stockholders' Equity (December 31, 2015) Common stock-$6 par value, 50,000 shares authorized, 35,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings $ 210,000 170,000 340,000 Total stockholders' equity $720,000 Stockholders' Equity (December 31, 2016) Common stock-$6 par value, 50,000 shares authorized, 41,000 shares issued, 5,000 shares in treasury Paid-in capital in excess of par value, common stock Retained earnings ($50,000 restricted by treasury stock) $246,000 206,000 420,000 872,000 (50,000) Less cost of treasury stock Total stockholders' equity $822,000 The following transactions and events affected its equity during year 2016 Jan. 5 Declared a $0.40 per share cash dividend, date of record January 10. Mar. 20Purchased treasury stock for cash Apr. 5 Declared a $0.40 per share cash dividend, date of record April 10 July 5 Declared a $0.40 per share cash dividend, date of record July 10 July 31 Declared a 20% stock dividend when the stock's market value is $12 per share Aug. 14 Issued the stock dividend that was declared on July 31 Oct. 5 Declared a $0.40 per share cash dividend, date of record October 10.

Explanation / Answer

Answer 1. Jan-05 Apr-05 Jul-05 Oct-05 Outstanding Common Shares Beginning Balance              35,000          35,000          35,000          35,000 Less: Treasury Stock (Mar 20)          (5,000)          (5,000)          (5,000) Add: Dividend Shares (Aug 14) - 30000 Shares X 20%            6,000 Shares Outstanding              35,000          30,000          30,000          36,000 Answer 2. Jan-05 Apr-05 Jul-05 Oct-05 Cash Dividends per share                  0.40              0.40              0.40              0.40 Shares Outstanding              35,000          30,000          30,000          36,000 Total Cash Dividends              14,000          12,000          12,000          14,400 Answer 3. Capitalization Amount                           - 6000 Shares X $12              72,000 Answer 4. Cost per Share - Treasury Stock                      10 ($50000 / 5000 Shares) Answer 5. Net Income Earned during the Year Retained Earnings - Dec 31, 2016           420,000 Add; Cash dividends Paid              52,400 Add: Stock Dividend Paid              72,000 Total           544,400 Less: Retained Earnings - Jan 1, 2016         (340,000) Net Income Earned during the Year           204,400

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