Question

The equity sections for Atticus Group at the beginning of the year (January 1) and end of the year (December 31) follow.

Stockholders’ Equity (January 1)
Common stock—$6 par value, 100,000 shares authorized, 40,000 shares issued and outstanding	$	240,000
Paid-in capital in excess of par value, common stock		200,000
Retained earnings		320,000
Total stockholders’ equity	$	760,000

Stockholders’ Equity (December 31)
Common stock—$6 par value, 100,000 shares authorized, 47,400 shares issued, 3,000 shares in treasury	$	284,400
Paid-in capital in excess of par value, common stock		259,200
Retained earnings ($50,000 restricted by treasury stock)		420,000
		963,600
Less cost of treasury stock		(50,000	)
Total stockholders’ equity	$	913,600

The following transactions and events affected its equity during the year.

Jan.		5		Declared a $0.40 per share cash dividend, date of record January 10.
Mar.		20		Purchased treasury stock for cash.
Apr.		5		Declared a $0.40 per share cash dividend, date of record April 10.
July		5		Declared a $0.40 per share cash dividend, date of record July 10.
July		31		Declared a 20% stock dividend when the stock’s market value was $14 per share.
Aug.		14		Issued the stock dividend that was declared on July 31.
Oct.		5		Declared a $0.40 per share cash dividend, date of record October 10.

1a. How many common shares are outstanding on each cash dividend date?

Jan 5: Apr 5: July 5: Oct 5:

1b. What is the total dollar amount for each of the four cash dividends?

Jan 5: Apr 5: July 5: Oct 5:

1c. What is the amount of retained earnings transferred to pain in capital accounts for the stock dividend?

1d. How much net income did the company earn this year?

Answer 1

• Requirements asked

[1]

	05-Jan	05-Apr	05-Jul	05-Oct
Outstanding Common shares	40,000	37,000	37,000	44,400
Working Notes:	Existing as beginning balance	3,000 treasury stock purchased	[ no transaction affected no. of shares	[37000 x 20% stock dividend]
		[40000 - 3000]	between these dates]	[37000 + 7400]

[2]

Working		05-Jan	05-Apr	05-Jul	05-Oct
A	Outstanding Common shares	40,000	37,000	37,000	44,400
B	Dividend per share	$                       0.40	$                     0.40	$                     0.40	$                     0.40
C = A x B	Answer: Cash Dividends amount	$            16,000.00	$           14,800.00	$           14,800.00	$          17,760.00

[3]

A	Outstanding shares on Jul 31	37,000
B	Stockdividend rate	20%
C = A x B	No. of stock to be issued as Stock Dividends	7,400
D	Market value per share	$                    14.00
E = C x D	Capitalization amount of Retained Earnings	$          103,600.00

[4]

A	Treasury Stock value	$            50,000.00
B	No. of shares as Treasury Stock	3,000
C = A/B	Cost per share	$                    16.67

[5]

Retained earnings - Ending balance	$          420,000.00
Total Cash Dividends	$            63,360.00
Total Stock Dividends	$          103,600.00
Total	$          586,960.00
Less: Retained earnings - Beginning balance	$          320,000.00
Net Income	$          266,960.00