In: Accounting
1.
All of the following normally are found in a corporation's stockholders' equity section except
Select one:
a. Stock Dividend Distributable
b. Cash Dividend Payable
c. Paid-in Capital in Excess of Par Value
d. Retained Earning
2.
All of the following normally are found in a corporation's stockholders' equity section except
Select one:
a. Stock Dividend Distributable
b. Cash Dividend Payable
c. Paid-in Capital in Excess of Par Value
d. Retained Earning
3.
Jostens Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 10% bonds outstanding during 2024. The preferred stock is convertible into 20,000 shares of common stock. During 2024, Jostens paid dividends of $1.20 per share on its common stock and $2.50 per share on its preferred stock. Each $1,000 bond is convertible into 10 shares of common stock. The net income for the year ended December 31, 2024 was $800,000. Assume the income tax rate was 30%. Diluted earnings per share for 2024 (rounded to the nearest penny) are:
Select one:
a. $3.64
b. $3.35
c. $2.94
d. $3.28
e. $3.22
Answers
1) Option b, Cash Dividend Payable
A common stock dividend distributable appears in the shareholders' equity section of a balance sheet, whereas cash dividends distributable appear in the liabilities section.
2) Option b, Cash Dividend Payable
3) Option a. $3.64
workings
Step 1: Calculate the earning left for equity shareholder
Net Income $800,000
Less: Preference Dividend (20000* $2.5) $50,000
Earnings for common share holders $750,000
Step 2: Calculate the increase earnings due to the conversion of preference shares and bonds into common stock
Particulars | Amount |
---|---|
Preference dividend (Step 1) | $50000 |
Interest saved (($1,000,000 * 10%) - ($1,000,000 * 10%) *30%) | $70,000 |
Total increase in the earnings | $120,000 |
Step 3: Calculate the weighted average common stock outstanding assuming all preference shares and bond are converted
Particulars | Amount |
---|---|
Common stock (given) | 200,000 |
Preference shares converted to common stock | 20,000 |
Bonds converted to common stock (($1,000,000 / $1,000) * 10 shares) | 10,000 |
Total weighted average common stock outstanding | 230,000 |
Step 4: Calculate the diluted earnings per share fro 2017 as follows:
Diluted earnings per share =
=
= $3.78 (rounded to $3.64)