Question

Problem 11-4A Analysis of changes in stockholders' equity accounts LO C3, P2, P3 [The following information applies to the questions displayed below.] The equity sections from Atticus Group's 2015 and 2016 year-end balance sheets follow. Stockholders' Equity (December 31, 2015) Common stock-$5 par value, 50,000 shares authorized, 35,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings $ 175,000 135,000 340,000 Total stockholders' equity $650,000 Stockholders' Equity (December 31, 2016) Common stock-$5 par value, 50,000 shares authorized, 41,000 shares issued, 5,000 shares in treasury Paid-in capital in excess of par value, common stock Retained earnings ($40,000 restricted by treasury stock) $205,000 189,000 420,000 814,000 (40,000) Less cost of treasury stock Total stockholders' equity $ 774,000 The following transactions and events affected its equity during year 2016. Jan. 5 Declared a $0.50 per share cash dividend, date of record January 10. Mar. 20 Purchased treasury stock for cash. Apr. 5 Declared a $0.50 per share cash dividend, date of record April 10. July 5 Declared a $0.50 per share cash dividend, date of record July 10. July 31 Declared a 20% stock dividend when the stock's market value is $14 per share. Aug. 14 Issued the stock dividend that was declared on July 31. Oct. 5 Declared a $0.50 per share cash dividend, date of record October 10.

Answer 1

Working Note:- Statement Showing Number of Common stocks outstanding for the purpose of Dividend.

Particulars	Explanations	No. Of shares
Opening No. Common stock on Jan 1, 2016		35000
Less :- Treasury Stock purchased on March 20, 2016	(See Stockholder Equity Dec. 31, 2016)	-5000
		30000
Add:- Stock Dividend Issued on August 14, 2016	(30000 x 20%)	6000
Closing No of common stocks on Dec. 31, 2016. (Excluding Treasury Stock)		36000
Add :- Treasury Stock purchased earlier		5000
Closing No of common stocks on Dec. 31, 2016. (Including Treasury Stock)		41000

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Answer 1:- Outstanding Common shares on each cash dividend date
Particulars	Jan - 5	Apr - 5	July - 5	Oct - 5
Outstanding Common shares on each cash dividend date	35000	30000	30000	36000
Answer 2:- Cash Dividend Paid on each date
Particulars	Jan - 5	Apr - 5	July - 5	Oct - 5
Outstanding Common shares on each cash dividend date	35000	30000	30000	36000
Cash Dividend per Share ($ per share)	$0.50	$0.50	$0.50	$0.50
Cash Dividend (Amount in $)	$17,500.00	$15,000.00	$15,000.00	$18,000.00

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Answer 3: - Amount to be capitalization of retained earnings for declaring stock dividend
Number of Shares Distributed as Dividends	6000
Market Value of per Common share	$14.00
Amount Capitalized from retained earnings	$84,000.00
Answer 4:- Cost per share of treasury stock purchased
Cost per share of treasury stock purchased
= (Retained earning restricted by Treasury stock/ Number of Treasury stock)
= ($40,000/ 5000)
= $8 per treasury stock purchased

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Answer 5:- Computing Income earned during 2016.
Particulars	Amount ($)
Closing Retained Earning as on Dec.31	$420,000.00
Add:- Dividends Paid (including stock dividend)	$149,500.00	(17500+15000+15000+18000+84000)
Less:- Opening balance of Retained Earning on Jan. 01, 2016	($340,000.00)
Net Income for 2016	$229,500.00