Question

[The following information applies to the questions displayed below.]

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—$4 par value, 100,000 shares authorized, 30,000 shares issued and outstanding	$	120,000
Paid-in capital in excess of par value, common stock		80,000
Retained earnings		320,000
Total stockholders’ equity	$	520,000

Stockholders’ Equity (December 31)
Common stock—$4 par value, 100,000 shares authorized, 35,400 shares issued, 3,000 shares in treasury	$	141,600
Paid-in capital in excess of par value, common stock		112,400
Retained earnings ($30,000 restricted by treasury stock)		420,000
		674,000
Less cost of treasury stock		(30,000	)
Total stockholders’ equity	$	644,000

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 $10 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.

5. How much net income did the company earn this year

The answer is not 156880

Answer 1

Cash dividend = (30000*.40+27000*.40+27000*.40+32400*.40) = 46560

Stock dividend = 27000*20%*10 = 54000

Net income = Beginning equity-Cash dividend-stock dividend-Ending equity

= 320000-46560-54000-420000

Net income = 200560