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Required information Problem 11-4A Analysis of changes in stockholders' equity accounts LO C3, P2, P3 [The...
Required information
Problem 11-4A Analysis of changes in stockholders' equity accounts LO C3, P2, P3
[The following information applies to the questions
displayed below.]
The equity sections from Atticus Group’s 2016 and 2017 year-end
balance sheets follow.
| Stockholders’ Equity (December 31, 2016) | ||
| Common stock—$5 par value,
100,000 shares authorized, 35,000 shares issued and outstanding |
$ | 175,000 |
| Paid-in capital in excess of par value, common stock | 135,000 | |
| Retained earnings | 340,000 | |
| Total stockholders’ equity | $ | 650,000 |
| Stockholders’ Equity (December 31, 2017) | |||
| Common stock—$5 par value,
100,000 shares authorized, 41,400 shares issued, 3,000 shares in treasury |
$ | 207,000 | |
| Paid-in capital in excess of par value, common stock | 179,800 | ||
| Retained earnings ($40,000 restricted by treasury stock) | 420,000 | ||
| 806,800 | |||
| Less cost of treasury stock | (40,000 | ) | |
| Total stockholders’ equity | $ | 766,800 | |
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. |
Problem 11-4A Part 1
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
| Answer 1 | ||||||||||
| Jan.5 | Apr.5 | July.5 | Oct.5 | |||||||
| Outstanding common shares | 35000 | 32000 | 32000 | 38400 | ||||||
| Answer 2 | ||||||||||
| Jan.5 | Apr.5 | July.5 | Oct.5 | |||||||
| Cash dividend amounts | $17,500.00 | $16,000.00 | $16,000.00 | $19,200.00 | ||||||
| Answer 3 | ||||||||||
| The amount of the capitalization of retained earnings for the stock dividend = No.of shares issued as a stock dividend * Market value per share at the time declaration | ||||||||||
| No.of shares distributed as stock dividend = 32000 shares * 20% = 6400 | ||||||||||
| Market value per share at the time declaration = $12 per share | ||||||||||
| The amount of the capitalization of retained earnings for the stock dividend = 6400 shares * $12 = $76,800 | ||||||||||
| Answer 4 | ||||||||||
| The per share cost of the treasury stock purchased = Cost of treasury stock / no.of shares purchased | ||||||||||
| The per share cost of the treasury stock purchased = $40000 / 3000 shares = $13.33 per share | ||||||||||
| Answer 5 | ||||||||||
| Calculation of net income earned by company in 2017 | ||||||||||
| Retained Earnings balance as on Dec.31,2017 | $420,000.00 | |||||||||
| Add : Cash dividend declared and paid | $68,700.00 | |||||||||
| Add : Stock dividend declared | $76,800.00 | |||||||||
| Less : Retained earnings balance as on Dec.31,2016 | $340,000.00 | |||||||||
| Net Income earned by Company in 2017 | $225,500.00 | |||||||||
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