Homework Answers
1. Legal capital of a business is the amount which cannot be distributed a dividend or by any other means. It is the Par Value of the common Stock and stated value of preferred stock.
| Preferred Stock | $2800000 |
| Common Stock | $2500000 |
| Total Legal | $5300000 |
2.
| Amount of Preferred share at par Value (A) | $2800000 |
| Par value per share (B) | $100 |
| Number of Preferred shares are outstanding (A/B) | 28000 |
3.
| Amount of Common stock at par Value (A) | $2500000 |
| Par value per share (B) | $25 |
| Number of common stock are outstanding (A/B) | 100000 |
4. Amount of Preferred share at par Value = $2800000
Rate of Dividend = 6%
Total Amount of dividend paid annually to Preferred Shareholders = 2800000*6% = $168000
5.
| Amount outstanding at par value | $2500000 |
| Add: Additional Paid in Capital- Common Stock | $1500000 |
| Total Issued value common Stock (A) | $4000000 |
| Number of Common Stock Outstanding (B) | 100000 |
| Issued Price Per common Stock (A/B) | $40 |
6.
| Beginning balance retained earning | $2300000 |
| Add: Net Income for the year | $1440000 |
| Less: Retained Earning at the end of the year | $2960000 |
| Dividend Paid (A+B-C) | $780000 |
| Dividend paid on preferred shares | $168000 |
| Balance dividend paid for Common Stockholders | $612000 |
| Dividend Per share for common stock (612000/100000) | $6.12 |
In case of any clarification, please do comment. Thank you
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