Question

31, Stockholders Equity: Preferred stock ($50 par) Common stock ($0.10 par) Additional Paid in capital Total paid in capital Retained earnings Treasury stock (5,000 common shares) Total stockholders' equity $500,000 30,000 7,520,000 8,050,000 610,100 (150,000) $8,510,100 1. How many shares of preferred stock have been issued? 2a. How many shares of common stock have been issued? 2b. How many of the common shares are outstanding? 3. If the common shares were issued at $25 per share, at what average price per share were the preferred shares issued? $ 4. If retained earnings at the beginning of the period was $548,200 and $128,900 was earned in net income, what was the amount of dividends declared during the year? $ 5. What was the average cost per share of the treasury stock acquired?

Answer 1

ANSWERS:

1) 10,000 shares

2 a) 300,000 shares

2 b) 295,000 shares

3) $ 55 per share

4) $ 67,000

5) $ 30 per share.

All explanation is given below :

1)
Preferred stock issued = preferred stock amount / par value
preferred stock issued = $ 500,000 / $ 50 par
preferred stock issued = 10,000 shares
2 a )
common stock issued = common stock amount / par value
common stock issued = $ 30,000 / $0.10 par
common stock issued = 300,000 shares
2 b)
common shares are outstanding =common shares issued - treasury shares
common shares are outstanding = 300,000 shares - 5,000 shares
common shares are outstanding = 295,000 shares
3)
common shares issued at $ 25 per share
journal entry :
	general journal	debit	credit
1)	cash ( 300,000 shares * $ 25 )	$ 7,500,000
	common stock ( 300,000 shares * 0.10 par )		$ 30,000
	additional paid in capital ($ 7,500,000 -$ 30,000)		$ 7,470,000
	( to record issue of common stock @ 25 per share )
2)
	Let price per preference share = P
	general journal	debit	credit
	cash ( 10,000 shares * P )	10,000 shares*P
	Preferred stock ( 10,000 shares * $ 50 )		$ 500,000
	Additional paid in capital		( 10,000*P - $500,000)
	( To record issue of preferred stock )
	additional paid in capital (shown in balance sheet)= $ 7,520,000
	equation form:
	$ 7,520,000 = $ 7,470,000 + ( 10,000 shares *P - $ 500,000 )
	$7,520,000 - $ 7,470,000 = 10,000 shares* P - $ 500,000
	$ 7,520,000 -$ 7,470,000 + $ 500,000 = 10,000 shares *P
	$ 550,000 = 10,000 shares *P
	P = $ 550,000 / 10,000 shares
	P = $ 55 per shares
	so, average price per share were the preferred shares issued = $ 55 per shares
4)
	amount of dividend declared during the year :
	equation is
	Ending retained earnings = beginning retained earnings + net income income - dividend
	$ 610,100 = $ 548,200 + $ 128,900 - dividend
	so, Dividend = $ 548,200 + $ 128,900 - $ 610,100
	so, Dividend = $ 67,000
5)
	average cost per share of treasury stock acquired
	average cost per share = treasury stock acquired / number of shares acquired
	average cost per share = $ 150,000 / 5,000 shares
	average cost per share =$ 30 per share
	So, the average cost per share of treasury stock acquired is $ 30 per share.