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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 2 years ago
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