The stockholders’ equity section of Martinez Corp.’s balance sheet at December 3
ID: 2571921 • Letter: T
Question
The stockholders’ equity section of Martinez Corp.’s balance sheet at December 31 is presented here. MARTINEZ CORP. Balance Sheet (partial) Stockholders’ equity Paid-in capital Preferred stock, cumulative, 9,833 shares authorized, 5,900 shares issued and outstanding $ 595,900 Common stock, no par, 748,707 shares authorized, 579,000 shares issued 1,737,000 Total paid-in capital 2,332,900 Retained earnings 1,158,000 Total paid-in capital and retained earnings 3,490,900 Less: Treasury stock (7,500 common shares) 40,000 Total stockholders’ equity $3,450,900 From a review of the stockholders’ equity section, answer the following questions. (a) How many shares of common stock are outstanding? Common stock outstanding Entry field with correct answer 571500 shares (b) Assuming there is a stated value, what is the stated value of the common stock? The stated value of the common stock $Entry field with correct answer 3 per share (c) What is the par value of the preferred stock? The par value of the preferred stock $Entry field with correct answer 101 per share (d) If the annual dividend on preferred stock is $47,672, what is the dividend rate on preferred stock? The dividend rate Entry field with correct answer 8 % (e) If dividends of $71,700 were in arrears on preferred stock, what would be the balance reported for retained earnings? The Retained Earnings balance
Explanation / Answer
Answer to Part a)
Number of Common Stock Outstanding = No. of Issued Common Stock – No. of Treasury Stock
No. of Issued Common Stock = 579,000
No. of Treasury Stock = 7,500
Number of Common Stock Outstanding = 579,000 – 7,500
Number of Common Stock Outstanding = 571,500 shares
Answer to Part b)
Stated Value = Common Stock issued / No. of Issued Common Stock
Stated Value = 1,737,000 / 579,000
Stated Value = $3
Answer to Part c)
Par Value of Preferred Stock = Preferred Stock issued / No. of Preferred Stock issued
Par Value of Preferred Stock =595,900 / 5,900
Par Value of Preferred Stock = $101
Answer to Part d)
Preferred Dividend Rate = Annual Dividend / Preferred Stock issued
Preferred Dividend Rate = 47,672 / 595,900
Preferred Dividend Rate = 8%
Answer to Part e)
The Retained Earning will be shown at $71,700. The arrear of Dividend will be shown n Notes to Financial Statement. The dividend if declared will be shown in Balance Sheet as Current Liabilities and reduce Retained Earning by $71,700.
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