Question

Question 3: 1. Johnson Inc began operations in 20X6. In that year, the company earned net income of S145,000 and paid dividends of $1.25 per share on each of its 30,000 outstanding common shares. Calculate retained earnings at the end of 20X6 Continue with Johnson Inc. from #1. In the following year, Johnson incurred a loss of $127,000 and paid no dividends. Calculate retained eanings or deficit at the end of 20X7 2. 3. Blaine Corporation had $200,000 in retained eamings at the end of 20X7. It started the year with $100,000 of retained eamings. During 20X7, the company paid dividends of $20,000. Calculate the net income for the year 4. Princess Company has the following shareholders' equity on its balance sheet Preferred shares, S9 cumulative, 4,000 issued and outstanding Common shares, 50,000 issued and outstanding Retained earnings Total shareholders' equity $400,000 2,600,000 460,000 3,460,000 Calculate the total annual preferred dividend entitlement. Calculate the total amount of contributed capital If the company paid total dividends of S120,000 in the year, and there were no preferred dividends owing from past years, how much did the common shareholders receive per share? a. b. c. d. Calculate the market price of the common shares. e. Which shareholders have the right to vote for the Board of Directors? 5. Suppose that Company X reported earnings of $100,000 and paid dividends of $40,000 in 20X6. What happened to the remainder?

Answer 1

1. Retained earnings:

	$
Net Income	1,45,000
Less: Dividend @ 1.25 on 30000 shares	-37,500
Retained earnings	1,07,500

2.

	$
Net Income	1,45,000
Less: Dividend @ 1.25 on 30000 shares	-37,500
Retained earnings 20X6 (A)	1,07,500
Loss in 20X7 (B)	-1,27,000
Retained earnings 20X7	-19,500

3.

	$
Earning at end of 20X7	2,00,000
Add: Dividend paid	20,000
Total Earning at end of 20X7 before dividend	2,20,000
Less: Earning at start of 20X7	1,00,000
Net Income for the year	1,20,000

Answered first three.