The equity sections from Atticus Group’s 2016 and 2017 year-end balance sheets follow. Stockholders’ Equity (December...

The equity sections from Atticus Group’s 2016 and 2017 year-end balance sheets follow.

Stockholders’ Equity (December 31, 2016)
Common stock—$6 par value, 100,000 shares authorized, 35,000 shares issued and outstanding	$	210,000
Paid-in capital in excess of par value, common stock		170,000
Retained earnings		360,000
Total stockholders’ equity	$	740,000

Stockholders’ Equity (December 31, 2017)
Common stock—$6 par value, 100,000 shares authorized, 41,200 shares issued, 4,000 shares in treasury	$	247,200
Paid-in capital in excess of par value, common stock		207,200
Retained earnings ($50,000 restricted by treasury stock)		420,000
		874,400
Less cost of treasury stock		(50,000	)
Total stockholders’ equity	$	824,400

The following transactions and events affected its equity during year 2017.

Jan.	5	Declared a $0.50 per share cash dividend, date of record January 10.
Mar.	20	Purchased treasury stock for cash.
Apr.	5	Declared a $0.50 per share cash dividend, date of record April 10.
July	5	Declared a $0.50 per share cash dividend, date of record July 10.
July	31	Declared a 20% stock dividend when the stock’s market value was $12 per share.
Aug.	14	Issued the stock dividend that was declared on July 31.
Oct.	5	Declared a $0.50 per share cash dividend, date of record October 10. a.How many common shares are outstanding on each cash dividend date? b.What is the total dollar amount for each of the four cash dividends? c.What is the amount of the capitalization of retained earnings for the stock dividend? d.What is the per share cost of the treasury stock purchased? e.How much net income did the company earn during year 2017?

Solutions

Expert Solution

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a.How many common shares are outstanding on each cash dividend date?

Jan 5		35000	Shares
Apr 5	35000-4000 Treasury	31000	Shares
Jul 5		31000	Shares
Oct 5	31000+(31000*20%) Stock Dividend	37200	Shares

b.What is the total dollar amount for each of the four cash dividends?

Jan 5	35000*0.5	$ 17,500
Apr 5	31000*0.5	$ 15,500
Jul 5	31000*0.5	$ 15,500
Oct 5	37200*0.5	$ 18,600

c.What is the amount of the capitalization of retained earnings for the stock dividend?

	6200 Shares *$ 12	$ 74,400

d.What is the per share cost of the treasury stock purchased?

	$ 50000/4000 Shares	$ 12.50

e.How much net income did the company earn during year 2017?

	Ending Retained Earning	$ 420,000
	Add: Cash Dividends	$ 67,100
	Add: Stock Dividends	$ 74,400
	Less: Beginning Retained Earning	$ 360,000

	Net Income	$ 201,500

ekkarill92 answered 1 year ago

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