In: Accounting
Identifying and Analyzing Financial Statement Effects of
Dividends
The stockholders' equity of Hammel Company at December 31, 2016, is
shown below.
5% preferred stock, $100 par value, 10,000 shares authorized; 6,000 shares issued and outstanding | $600,000 |
Common stock, $5 par value, 200,000 shares authorized; 70,000 shares issued and outstanding | 350,000 |
Paid-in capital in excess of par value—preferred stock | 50,000 |
Paid-in capital in excess of par value—common stock | 400,000 |
Retained earnings | 747,000 |
Total stockholders' equity | $2,147,000 |
The following transactions, among others, occurred during
2017:
Apr. 1 Declared and issued a 100% stock dividend on all outstanding
shares of common stock. The market value of the stock was $14 per
share.
Dec. 7 Declared and issued a 4% stock dividend on all outstanding
shares of common stock. The market value of the stock was $17 per
share.
Dec. 20 Declared and paid (1) the annual cash dividend on the
preferred stock and (2) a cash dividend of 90 cents per common
share.
(a) Use the financial statement effects template to indicate the
effects of these separate transactions.
Use negative signs with answers, when appropriate.
Balance Sheet |
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---|---|---|---|---|---|---|---|---|---|---|
Transaction | Cash Asset | + |
Noncash Assets |
= | Liabilities | + |
Contributed Capital |
+ |
Earned Capital |
|
Apr. 1 | Answer | Answer | Answer | Answer | Answer | |||||
Dec. 7 | Answer | Answer | Answer | Answer | Answer | |||||
Dec. 20 | Answer | Answer | Answer | Answer | Answer |
Income Statement |
|||||
---|---|---|---|---|---|
Revenue |
- |
Expenses |
= |
Net Income |
|
Answer | Answer | Answer | |||
Answer | Answer | Answer | |||
Answer | Answer | Answer |
(b) Compute retained earnings for 2017 assuming that the company
reports 2017 net income of $523,000.
$Answer
Can you please show your math for all answers? Thank you in advance!
1-Apr | large stock dividend is always issued at par | |||||||
70,000 shares *$5= | 350000 | |||||||
7-Dec | 4% stock dividend is small dividend | |||||||
140,000*4% = | 5600 | |||||||
5600 shares issued at market value of $17= | 95200 | |||||||
20-Dec | dividend | |||||||
preferred = 600,000*5%= | 30000 | |||||||
common =(140000+5600)*.9= | 131040 | |||||||
total dividends | 161040 | |||||||
total dividends | 606240 | |||||||
Non | contributed | earned | revenue | Expense | net | |||
TRN | Cash | cash | liabilities | capital | capital | income | ||
Asset | Assets | |||||||
1-Apr | 350,000 | -350,000 | ||||||
7-Dec | 95,200 | -95,200 | ||||||
20-Dec | -161,040 | -161,040 | ||||||
b) | Retained earnings for 2017 | |||||||
opening retained earnings | 747,000 | |||||||
Add:Net income for the year | 523,000 | |||||||
subtotal | 1,270,000 | |||||||
less:total dividends | 606240 | |||||||
retained earnings for 2017 | 663,760 | |||||||