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The equity sections from Hovo Corporations 2016 and 2017 balance sheets follow. Problem 13-4B Analysis of changes in stockholders equity accounts C3P2 P30 Stockholders Equity (December 31, 2016) Common stock-$20 par value, 30,000 shares authorized 17,000 shares issued and outstanding.. Paid-in capital in excess of par value, common stock Retained earnings Total stockholders equity $340,000 60,000 270,000 $670,000
Chapter 13 Accounting for Corporations Stockholders Equity (December 31, 2017) Common stock-$20 par value, 30,000 shares authorized 19,000 shares issued, 1,000 shares in treasury $380,000 Paid-in capital in excess of par value, common stock ....................104,000 779,200 Less cost of treasury stock... Total stockholders equity 739.200 The following transactions and events affected its equity during year 2017 Feb. 15 Declared a $0.40 per share cash dividend, date of record five days later Mar. 2 Purchased treasury stock for cash. May 15 Declared a $0.40 per share cash dividend, date of record five days later Aug. 15 Declared a $0.40 per share cash dividend, date of record five days later Oct. 4 Declared a 12.5% stock dividend when the stocks market value is $42 per share. Oct. 20 Issued the stock dividend that was declared on October 4. Nov. 15 Declared a $O.40 per share cash dividend, date of record five days later. Required 1. How many common shares are outstanding on each cash dividend date? 2. What is the total dollar amount for each of the four cash dividends? 3. What is the amount of the capitalization of retained earnings for the stock dividend? 4. What is the per share cost of the treasury stock purchased? 5. How much net income did the company earn during year 2017? Check (3) $84,00 4) $40 (5) $136
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Answer #1

1.

Cash dividend date Common shares outstanding
Feb-15 17000
May-15 16000 (17000 - 1000)
Aug-15 16000
Nov-15 18000 (16000 x 1.125)

2.

Cash dividend date Common shares outstanding Per share cash dividend Total cash dividend
Feb-15 17000 $                                     0.40 $                          6,800
May-15 16000 $                                     0.40 $                          6,400
Aug-15 16000 $                                     0.40 $                          6,400
Nov-15 18000 $                                     0.40 $                          7,200

3. Amount of capitalization of retained earnings for the stock dividend: $84000

Number of shares issued as stock dividend = 16000 x 12.5% = 2000

Capitalization of retained earnings = 2000 x $42 = $84000

4. Per share cost of treasury stock = Cost of treasury stock/Number of shares of treasury stock = $40000/1000 = $40

5. Net income earned during 2017: $136000

Retained earnings, Dec. 31, 2017 295200
Add: Cash dividends 26800
Add: Stock dividends 84000
406000
Less: Retained earnings, Dec. 31, 2016 270000
Net income $ 136000
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