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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?

Jan. 5 Apr. 5 July 5 Oct. 5
Outstanding common shares


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

Jan. 5 Apr. 5 July 5 Oct. 5
Cash dividend amounts

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

Capitalization amount

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

Cost per share

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

Net income

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

ekkarill92 answered 2 years ago
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