Question

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The equity sections from Salazar Group’s 2015 and 2016 year-end statements of financial position follow.

Shareholders’ Equity (December 31, 2015)
Share Capital—Ordinary, $4 par value, 50,000 shares authorized,      30,000 shares issued and outstanding	$	120,000
Share Premium—Ordinary		80,000
Retained earnings		320,000
Total shareholders’ equity	$	520,000

   

Shareholders’ Equity (December 31, 2016)
Share Capital—Ordinary, $4 par value, 50,000 shares authorized,      35,200 shares issued, 4,000 shares in treasury	$	140,800
Share Premium—Ordinary		111,200
Retained earnings ($50,000 restricted by treasury shares)		420,000
		672,000
Less cost of treasury shares		(50,000	)
Total shareholders’ equity	$	622,000

The following transactions and events affected its equity during year 2016.

Jan.	5		Declared a $0.50 per share cash dividend, date of record January 10.
Mar.	20		Purchased treasury shares 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% shares dividend when the shares’ market value is $10 per share.
Aug.	14		Issued the share dividend that was declared on July 31.
Oct.	5		Declared a $0.50 per share cash dividend, date of record October 10.

References

Section BreakLearning Objective: 13-C3 Explain the items reported in comprehensive income and equity.Learning Objective: 13-P3 Record purchases and sales of treasury shares and the retirement of shares.

Difficulty: 3 HardLearning Objective: 13-P2 Record transactions involving cash dividends, shares dividends, and shares splits.

5.

value:
10.00 points

Required information

Required:
1.	How many ordinary shares are outstanding on each cash dividend date?

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

References

WorksheetLearning Objective: 13-C3 Explain the items reported in comprehensive income and equity.Learning Objective: 13-P3 Record purchases and sales of treasury shares and the retirement of shares.

Difficulty: 3 HardLearning Objective: 13-P2 Record transactions involving cash dividends, shares dividends, and shares splits.

Ask your instructor a questionCheck my work

6.

value:
10.00 points

Required information

2.	What is the total dollar amount for each of the four cash dividends? (Omit the "$" sign in your response.)

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

References

WorksheetLearning Objective: 13-C3 Explain the items reported in comprehensive income and equity.Learning Objective: 13-P3 Record purchases and sales of treasury shares and the retirement of shares.

Difficulty: 3 HardLearning Objective: 13-P2 Record transactions involving cash dividends, shares dividends, and shares splits.

Ask your instructor a questionCheck my work

7.

value:
10.00 points

Required information

3.	What is the amount of the capitalization of retained earnings for the shares dividend? (Omit the "$" sign in your response.)

Capitalization amount

$

References

WorksheetLearning Objective: 13-C3 Explain the items reported in comprehensive income and equity.Learning Objective: 13-P3 Record purchases and sales of treasury shares and the retirement of shares.

Difficulty: 3 HardLearning Objective: 13-P2 Record transactions involving cash dividends, shares dividends, and shares splits.

Ask your instructor a questionCheck my work

8.

value:
10.00 points

Required information

4.	What is the per share cost of the treasury shares purchased? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Cost per share

$

References

WorksheetLearning Objective: 13-C3 Explain the items reported in comprehensive income and equity.Learning Objective: 13-P3 Record purchases and sales of treasury shares and the retirement of shares.

Difficulty: 3 HardLearning Objective: 13-P2 Record transactions involving cash dividends, shares dividends, and shares splits.

Ask your instructor a questionCheck my work

9.

value:
10.00 points

Required information

5.	How much net profit did the company earn during year 2016? (Omit the "$" sign in your response.)

Net profit

$

Answer 1

Part 1

	Jan 5.	Apr. 5	July 5	Oct. 5
Outstanding common shares	30000	26000	26000	20800

	Jan 5.	Apr. 5	July 5	Oct. 5
Beginning balance	30000	30000	30000	30000
Less treasury stock (Mar. 20)		(4000)	(4000)	(4000)
Plus dividend shares (July 31) (26000*20%)				(5200)
Outstanding shares	30000	26000	26000	20800

(30000-4000) = 26000

Part 2

	Jan 5.	Apr. 5	July 5	Oct. 5
Cash dividends	15000	13000	13000	10400

	Jan 5.	Apr. 5	July 5	Oct. 5
Outstanding common shares	30000	26000	26000	20800
Dividend per share	0.50	0.50	0.50	0.50
Total dividend	15000	13000	13000	10400

Part 3

Capitalization amount

$52000

Number of share	5200
Market value per share	X 10
Total capitalization	52000

Part 4

Cost per share

$12.5

Total amount paid	50000
Shares purchased	/ 4000
Cost per share	12.5

Part 5

Net profit

$203400

Retained earnings, ending balance	420000
+ total dividends (15000+13000+13000+10400)	51400
+ total capitalized amount	52000
- Retained earnings beginning balance	(320000)
Net Profit	203400