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The stockholders’ equity section of Velcro World is presented here. VELCRO WORLD Balance Sheet (partial) ($...

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 $ 5,300
Common stock, $1 par value 23,000
Additional paid-in capital 728,600
Total paid-in capital 756,900
Retained earnings 281,000
Treasury stock, 10,000 common shares (250,000 )
Total stockholders' equity $ 787,900

Based on the stockholders' equity section of Velcro World, answer the following questions. Remember that all amounts are presented in thousands.

Required:

1. How many shares of preferred stock have been issued? (Enter you answer in total number of shares, not in thousands.)

2. How many shares of common stock have been issued? (Enter you answer in total number of shares, not in thousands.)

3. If the common shares were issued at $23 per share, at what average price per share were the preferred shares issued?

4. If retained earnings at the beginning of the period was $243 million and $23 million was paid in dividends during the year, what was the net income for the year? (Enter your answer in million (i.e., 5,000,000 should be entered as 5).)

5. What was the average cost per share of the treasury stock acquired?

Solutions

Expert Solution

Requirement 1
5,300,000 shares = $5,300/$1 par value per share in thousand ((x 1,000).
5300*1000 = 5,300,000
Number of Shares = 5,300,000
5,300,000 shares of preferred stock have been issued
Requirement 2
23,000,000 shares = ($23,000 / $1 par value per share) in thousands (x 1,000).
23000*1000 = 23,000,000
Number of Shares = 23,000,000
23,000,000 shares of common stock have been issued
Requirement 3
The total paid-in capital for common stock is $529,000 (23,000 x $23).
Therefore, the total paid-in capital for preferred stock must be $227,900 ($7,56,900 – $5,29,000).
$227,900 divided by 5,300 shares indicates an issue price of $43 per share.
Preffered shares issued price $43 per share
Requirement 4
Net income = Retained earnings, beginning - Dividends -Retained earnings, ending
243-23-281 = (61) million
Net Income = 61million
Requirement 5
($250,000 / 10,000 shares) = $25 per share
Average cost $25 per share

ekkarill92 answered 6 months ago
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