Exercise 11-11 The stockholders\' equity section of Haley Corporation at Decembe

Question

Exercise 11-11 The stockholders' equity section of Haley Corporation at December 31 is as follows. HALEY CORPORATION Balance Sheet(Partial) Paid-in capital Preferred stock, cumulative, 10,000 shares authorized, 6,000 shares issued and $300,000 1,120,000 1,420,000 1,858,000 3,278,000 41,600 $3,236,400 outstanding Common stock, no par, 860,000 shares authorized, 560,000 shares issued Total paid-in capital Retained earnings Total paid-in capital and retained earnings Less: Treasury stock (8,000 common shares) Total stockholders' equity From a review of the stockholders' equity section, as chief accountant, write a mèmo to the president of the company answering the following questions. (a) How many shares of common stock are outstanding? (b) Assuming there is a stated value, what is the stated value of the common stock? (c) What is the par value of the preferred stock? (d) If the annual dividend on preferred stock is $27,000, what is the dividend rate on preferred stock? (e) If dividends of $54,000 were in arrears on preferred stock, what would be the balance in Retained Earnings? sl shares per share ]per share

Explanation / Answer

a) shares outstanding = issued - treasury stock 560,000-8,000 552000 shares b) Stated value of common stock = 1,120,000/560,000 2 per share c) par value of preferred stock 300,000/6000 50 per share d) dividend rate 50*6000*x% = 27000 x                    = (27000*100)/50*6000 9 % e) Balance in Retained earnings 1,858,000 (will remain same as not affected until and unless the dividend is declared)

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