Question

PA11-3 Finding Missing Amounts [LO 11-2, LO 11-3, LO 11-5]

At December 31, the records of Kozmetsky Corporation provided the following selected and incomplete data:

Common stock (par $2; no changes during the current year).

Shares authorized, 5,000,000.

Shares issued,   ? ; issue price $8 per share.

Shares held as treasury stock, 10,000 shares, cost $6 per share.

Net income for the current year, $481,000.

Common Stock account, $150,000.

Dividends declared and paid during the current year, $2 per share.

Retained Earnings balance, beginning of year, $800,000.

Required:

Complete the following: (Round "Earnings per share" to 2 decimal places.)

1. Shares issued Shares outstanding 2. The balance in Additional Paid-in Capital would be 3. Earnings per share is 4. Total dividends paid on common stock during the current year is 5. Treasury stock should be reported in the stockholders’ equity section of the balance sheet in the amount of 6. Assume that the board of directors voted a 2-for-1 stock split. After the stock split, the par value per share will be

References

Answer 1

Answer:

1	Shares issued	75,000
	Shares outstanding	65000
2	The balance in Additional Paid-in Capital would be	450000
3	Earnings per share is	7.40
4	Total dividends paid on common stock during the current year is	130000
5	Treasury stock should be reported in the stockholders’ equity section of the balance sheet in the amount of	60000
6	Assume that the board of directors voted a 2-for-1 stock split. After the stock split, the par value per share will be	$1

Working notes for the above answer is as under

1

2

The balance in Additional Paid-in Capital

=(8-2)*75000

=6*75000

=$450,000

3

EPS on net income

=net income / Share outstanding

= 481,000/65000

=$7.40

4

Dividend paid on common stock

=65000x $2 per share.

=$130,000

5

Treasury stock should be reported in the stockholders’ equity section of the balance sheet in the amount of

=10,000 share x 6 per share

=60,000

6

Assume that the board of directors voted a 2-for-1 stock split. After the stock split, the par value per share will be $1

new par value

= $2 per share / 2 share

=$1 per share