In: Accounting
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?
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 |