The equity sections from Hovo Corporation’s 2016 and 2017 balance sheets follow. Stockholders’ Equity (December 31,...

The equity sections from Hovo Corporation’s 2016 and 2017 balance sheets follow.

Stockholders’ Equity (December 31, 2016)
Common stock—$20 par value, 30,000 shares authorized,
17,000 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $340,000
Paid-in capital in excess of par value, common stock . . . . . . . . . . . . . . . . . . . . 60,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270,000
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $670,000

Stockholders’ Equity (December 31, 2017)
Common stock—$20 par value, 30,000 shares authorized,
19,000 shares issued, 1,000 shares in treasury . . . . . . . . . . . . . . . . . . . . . . . $380,000
Paid-in capital in excess of par value, common stock . . . . . . . . . . . . . . . . . . . . . 104,000
Retained earnings ($40,000 restricted by treasury stock) . . . . . . . . . . . . . . . . . 295,200
779,200
Less cost of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,000)
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $739,200

The following transactions and events affected its equity during year 2017.
Feb. 15 Declared a $0.40 per share cash dividend, date of record five days later.
Mar. 2 Purchased treasury stock for cash.
May 15 Declared a $0.40 per share cash dividend, date of record five days later.
Aug. 15 Declared a $0.40 per share cash dividend, date of record five days later.
Oct. 4 Declared a 12.5% stock dividend when the stock’s market value is $42 per share.
Oct. 20 Issued the stock dividend that was declared on October 4.
Nov. 15 Declared a $0.40 per share cash dividend, date of record five days later.

Required
1. How many common shares are outstanding on each cash dividend date?
2. What is the total dollar amount for each of the four cash dividends?
3. What is the amount of the capitalization of retained earnings for the stock dividend?
4. What is the per share cost of the treasury stock purchased?
5. How much net income did the company earn during year 2017?

Solutions

Expert Solution

1. How many common shares are outstanding on each cash dividend date?
Transactions			15-Feb	15-May	15-Aug	15-Nov
Opening Balance			17000	17000	17000	17000
Less Treasury Stock Issue on 2nd march			0	-1000	-1000	-1000
Add Dividend Diclearead on 4 oct			0	0	0	2000
Total O/s share			17000	16000	16000	18000
2. What is the total dollar amount for each of the four cash dividends?
Cash Dividend Amount per Share			0.6	0.6	0.6	0.6
Total O/s share			17000	16000	16000	18000
Cash Dividend Amount			10200	9600	9600	10800
3. What is the amount of the capitalization of retained earnings for the stock dividend?
Capitilization Amount of share			84000
Working			shares	MV	Captilization
Working			2000	42	84000
4. What is the per share cost of the treasury stock purchased?
Cost per share			40
Working			shares	paid amt	per share
Working			1000	40000	40
5. How much net income did the company earn during year 2017?
Retained Earning			270000

15-Feb		Dividend	10200
15-May		Dividend	9600
15-Aug		Dividend	9600
15-Nov		Dividend	10800
		other	84000
	total	less	124200
			145800

Retained Earning			295000
Net Income			149200

ekkarill92 answered 1 year ago

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