Question

Changes in Shareholders' Equity

On January 1, 2016, the Osgood Film Studios reported the following alphabetical list of shareholders' equity items:

Additional paid-in capital on common stock	$135,575
Additional paid-in capital on preferred stock	14,200
Common stock, $2 par	63,800
Preferred stock, $100 par	71,000
Retained earnings	171,000

During 2016, the company sold 4,400 shares of common stock for $13 per share and 350 shares of preferred stock for $127 per share. It also earned income of $94,000 and paid dividends of $7 per share on the preferred stock and $1.20 per share on the common stock outstanding at the end of 2016.

Required:

The following partially completed schedule will help you to organize the information for this exercise.

	Preferred Stock $100 par	Common Stock $2 par	Additional Paid-in Capital on Preferred Stock	Additional Paid-in Capital on Common Stock	Retained Earnings	Total
Balances, 1/1/16	$71,000	$63,800	$14,200	$135,575	$171,000	$455,575
Common stock issued
Preferred stock issued
Net income
Cash dividend paid on preferred
Cash dividend paid on common
Balances, 12/31/16						600,245

Answer 1

	Preferred Stock $100 par	Common Stock $2 par	Additional Paid-in Capital on Preferred Stock	Additional Paid-in Capital on Common Stock	Retained Earnings	Total
Balances, 1/1/16	$71,000	$63,800	$14,200	$135,575	$171,000	$455,575
Common stock issued		(4400 * $2) =$8800		(4400 * $11) =$48400		$57200
Preferred stock issued	(350 * $100) =$35000		(350 * $27) =$9450			$44450
Net income					$94000	$94000
Cash dividend paid on preferred					-$7420	-$7420
Cash dividend paid on common					-$43560	-$43560
Balances, 12/31/16	$106000	$72600	$23650	$183975	$214020	600,245

Explanations :-

Cash Dividend Paid on Preferred = Outstanding Preference shares * $7

Outstanding Preference shares = Beginning + Issued

= (71000/$100) + 350 = 1060

Preferred Dividend = 1060 shares * $7 = $7420

Cash Dividend Paid on common = Outstanding shares * $1.20

Outstanding shares = Beginning + Issued

= (63800/$2) + 4400 = 36300

Common dividend = 36300 shares * $1.20 = $43560