Question

When Resisto Systems, Inc, was formed, the company was authorized to issue 5,000 shares of $100 par value, 8 percent cumulative preferred stock, and 100,000 shares of $2 stated value common stock. Half of the preferred stock was issued at a price of $105 per share, and 87. share. At the end of the current year, Resisto has retained earnings of $382,000. 000 shares of the common stock were sold for $18 per a. Prepare the stockholders' equity section of the company's balance sheet at the end of the current year. Stockholders Equity $ 174.000 250,000 Cumulative preferred stock Common stock Total paid-in capital s 424,000 5 424,000 くPrev 1of 4… Next> 0 Hi e Oo re to search

Answer 1

1
a.			Stockholder's equity:
							$
	Common stock			(87000*2)			174000
	Cumulative preferred stock			(2500*100)			250000
	Additional paid-in-capital:
	Cumulative preferred stock			2500*(105-100)			12500
	Common stock			87000*(18-2)			1392000
	Total paid-in-capital						1828500
	Retained earnings						382000
	Total stockholder's equity						2210500
2
a.	Preferred stock issued=Capital stock of cumulative preferred stock/Par value=14000000/100=140000 shares
b.	Total amount of annual dividend=Capital stock of cumulative preferred stock*cumulative preferred stock %=14000000*7%=$ 980000
c.	Avarage issuance price per share=(Capital stock of common stock+Additional paid in capital of common stock)/Number of common stock=(19000000+44000000)/5000000=$ 12.6
d.	Legal capital=Capital stock=14000000+19000000=$ 33000000
	Total paid-in-capital=Legal capital+Additional paid-in-capital=33000000+44000000=$ 77000000
e.	Book value per share=Equity attributable to common stockholders/Number of common stock outstanding
							$
	Total stockholder's equity						141450000
	Less: capital stock value of preferred stock						14000000
	Equity attributable to common stockholders					a	127450000
	Common stock outstanding					b	5000000
	Book value per share					a/b	25.49
f.	No. Changes in market value will not affect the equity section and hence,not possible to determine the market value.
3
a.			Income statement
								$
	Net sales							7470000
	Less: Costs and other expenses							5940000
	Income from continuing operations							1530000
	Gain from discontonued operations (net of tax)							420000
	Net income							1950000
	Earnings per share:
	Income from continuing operations					(1530000/910000)		1.68
	Gain from discontonued operations (net of tax)					(420000/910000)		0.46
	Net income					(1950000/910000)		2.14
b.	Earnings per share of $ 1.68 preferred to comput the price-earning ratio
	This is because this earnings considers only operational activities and eliminates discontinued operations
4
a-1.						$
	Net income				(a)	1800000
	Number of common stock outstanding				(b)	400000
	Earnings per share				(a/b)	4.5
a-2.						$
	Net income					1800000
	Less:Preferred dividend			(100000*100*8%)		800000
	Income attributable to common stockholders (a)					1000000
	Number of common stock outstanding				(b)	300000
	Earnings per share				(a/b)	3.33
b.	EPS figure computed in a-2 is basic EPS.
	In order to be diluted EPS, Preferred stock has to be converible to common stock
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