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	$	4,200
Common stock, $1 par value		12,000
Additional paid-in capital		262,200
Total paid-in capital		278,400
Retained earnings		270,000
Treasury stock, 10,000 common shares		(140,000	)
Total stockholders' equity	$	408,400

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 $12 per share, at what average price per share were the preferred shares issued?

4. If retained earnings at the beginning of the period was $232 million and $12 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

Answer:

No. of shares of preferred stock issued
                = Value of preferred Stock / Par value
                = $ 4,200,000 / $ 1
                 = 4,200,000 Shares

No. of shares of preferred stock issued = 4,200,000 Shares

No. of shares of Common stock issued
                = Value of Common Stock / Par value
                = $ 12,000,000 / $ 1
                 = 12,000,000 Shares

No. of shares of Common stock issued = 12,000,000 Shares

Average price per share were preferred share issued
               = Additional Capital (-) paid in capital +Preferred stock / No. of Shares Issued
              =   $ 262,200,000 (-) [ 12,000,000 x ( $ 12 (-) $ 1) + $ 4,200,000 ) / 4,200,000 shares
              =    $ 134,400,000 / 4,200,000
              =   $ 32 per Share

Average price per share were preferred share issued = $ 32 per Share

Net income
        =    Ending retained earnings (+) Dividends paid (-) Beg. retained earnings
        =   $ 270   + $ 12 (-) $ 232
        =    $ 50 milions

Net income = $ 50 milions

Average cost per share of the treasury stock
               = Treasury Stock / No. of Shares
               =   $ 140,000 / 10,000
                =   $ 14 per Share

Average cost per share of the treasury stock = $ 14 per Share

ekkarill92 answered 1 year ago

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