The stockholders’ equity accounts of Miley Corporation on January 1, 2014, were

Question

The stockholders’ equity accounts of Miley Corporation on January 1, 2014, were as follows.

Preferred Stock (8%, $100 par noncumulative, 4,800 shares authorized) $288,000

Common Stock ($3 stated value, 336,400 shares authorized) 807,360

Paid-in Capital in Excess of Par Value—Preferred Stock 11,520

Paid-in Capital in Excess of Stated Value—Common Stock 269,120

Retained Earnings 694,600

Treasury Stock—(4,800 common shares) 38,400

During 2014, the corporation had the following transactions and events pertaining to its stockholders’ equity.

Feb. 1 Issued 4,900 shares of common stock for $34,300.

Mar. 20 Purchased 1,270 additional shares of common treasury stock at $9 per share.

Oct. 1 Declared a 8% cash dividend on preferred stock, payable November 1.

Nov. 1 Paid the dividend declared on October 1.

Dec. 1 Declared a $0.60 per share cash dividend to common stockholders of record on December 15, payable December 31, 2014.

Dec. 31 Determined that net income for the year was $275,900. Paid the dividend declared on December 1.

Journalize transactions, post, and prepare a stockholders equity section; calculate ratios.

(a) Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings.) (

b) Enter the beginning balances in the accounts and post the journal entries to the stockholders equity accounts. (Use T-accounts.)

(c) Prepare the stockholders equity section of the balance sheet at December 31, 2014. (c) Tot. paid-in capital $1,825,000 (d) Calculate the payout ratio, earnings per share, and return on common stockholders equity. (Note: Use the common shares outstanding on January 1 and December 31 to determine the average shares outstanding.)

Explanation / Answer

b.

c. Stockholders equity section of the balance sheet at December 31, 2014.

d.

1) Payout Ratio = $160,770/$275,900 = 58.27 %

2)Earning Per Share = $275,900-$23,040 /266,135= 0.9501

269120-4800=264320 , 274020+6070=267950 , 264320+267950/ 2 = 266,135

3) Return on common stockholders equity.

=$275,900-$23,040/2784,405 = 9.20%

3) Return on common stockholders equity

(a) Feb. 1 Cash    34,300 Common Stock (4,900 X $3)     14,700 Paid-in Capital in Excess of     19,600    Stated Value—Common    Stock Mar. 20 Treasury Stock—Common (1,270 X $9)    11,430 Cash     11,430 Oct. 1 Cash Dividends ($288,000 X .08)    23,040 Dividends Payable     23,040    23,040 Nov. 1 Dividends Payable     23,040 Cash Dec. 1 Cash Dividends 160,770    [269,120* + 4900 – (4,800+ 1,270)] X $.60 Dividends Payable 160,770 Dec. 31 Income Summary 275,900 Retained Earnings 275,900 31 Retained Earnings 183,810 Cash Dividends ($23,040 + $160,770) 183,810 31 Dividends Payable 160,770 Cash 160,770 *$807,360 ÷ $3

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