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The stockholders’ equity section of Sarasota Corp.’s balance sheet at December 31 is presented here. SARASOTA...

The stockholders’ equity section of Sarasota Corp.’s balance sheet at December 31 is presented here.

SARASOTA CORP. Balance Sheet (partial)
Stockholders’ equity
Paid-in capital
Preferred stock, cumulative, 10,900 shares authorized, 6,500 shares issued and outstanding		$ 663,000
Common stock, no par, 734,000 shares authorized, 564,000 shares issued		1,692,000
Total paid-in capital		2,355,000
Retained earnings		1,180,000
Total paid-in capital and retained earnings		3,535,000
Less: Treasury stock (7,800 common shares)		41,600
Total stockholders’ equity		$3,493,400

From a review of the stockholders’ equity section, answer the following questions.

(a) How many shares of common stock are outstanding?

Common stock outstanding

shares

(b) Assuming there is a stated value, what is the stated value of the common stock?

The stated value of the common stock

$ per share

(c) What is the par value of the preferred stock?

The par value of the preferred stock

$ per share

(d) If the annual dividend on preferred stock is $53,040, what is the dividend rate on preferred stock?

The dividend rate

%

(e) If dividends of $72,300 were in arrears on preferred stock, what would be the balance reported for retained earnings?

The Retained Earnings balance

$

Expert Solution

Answer a) shares of common stock outstanding = Issued common stock - treasury stock = 564,000 - 7800 = 556,200 shares b) Stated value of common stock = value of common stock / issued common stock = $ 1,692,000 / 564,000 =$3 c) Par value of preferred stock = value of preferred stock/ issued preferred stock = $ 663,000 / 6,500 = $ 102 d) Dividend rate on preferred stock = dividend on preferred stock/ outstanding preferred stock = $ 53,040 / $ 663,000 = 8% e) Retained eranings balance If dividends were in arrears on preferred stock, it will not affect the balance of retained earnings. Hence, it remains same. Therefore, Retained earnings = $ 1,180,000

ekkarill92 answered 2 years ago

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