Question

L01 LO3 L04 LO5 L02 Comprehensive Stockholders' Equity Transactions and Financial Ratios P 8. Stavski Plastics Corporation was chartered in the Commonwealth of Massa chusetts. The company was authorized to issue 10,000 shares of $100 par value, 6 percent preferred stock and 50,000 shares of no-par common stock. The com mon stock has a S2 stated value. The stock-related transactions for the quarter ended October 31, 2011, were as follows: Aug. 3 Issued 10,000 shares of common stock at $22 per share 15 Issued 8,000 shares of common stock for land. Asking price for the land was S100,000. Common stock's market value was $12 per share. Management wishes to record the land at the market value of the stock 22 Issued 5,000 shares of preferred stock for $500,000 4 10 Purchased 2,500 shares of common stock for the treasury for Oct. Issued 5,000 shares of common stock for $60,000 $6,500 Declared a quarterly cash dividend on the outstanding preferred stock and S0.10 per share on common stock outstanding, pay able on October 31 to stockholders of record on October 25 15 25 Date of record for cash dividends 31 Paid the cash dividends declared on October 15

Answer 1

1. Cash :

Aug 3	220,000	Oct 10	6,500
Aug 22	500,000	Oct 31	9,550
Oct 4	60,000

Common Stock:

		Aug 3 ( 10,000 x $ 2 )	20,000
		Aug 15 ( 8,000 x $ 2)	16,000
		Oct 4	10,000
		Balance, Oct 31	46,000

Paid-in Capital in Excess of Stated Value : Common Stock

		Aug 3	200,000
		Aug 15	80,000
		Oct 4	50,000
		Balance, Oct 31	330,000

Preferred Stock

		Aug 22	500,000
		Balance, Oct 31	500,000

Treasury Stock:

Oct 10	6,500
Balance, Oct 31	6,500

2.

Stavski Plastics Corporation Balance Sheet ( Partial ) October 31, 2011 Stockholders' Equity
Common Stock , $ 2 stated value per share, 23,000 shares issued	$ 46,000
Paid-in Capital in Excess of Stated Value : Common Stock	330,000
Preferred Stock, 6 % $ 100 par 5,000 shares issued and outstanding	500,000
Retained Earnings	13,450
Treasury Stock ( at cost )	(6,500)
Total Stockholders' Equity	$ 882,950

3. Dividends yield = Dividends per share / Market price per share * 100 = $ 0.10 / $ 25 ** 100 = 0.4 %

Price Earnings Ratio = Market Price per Share / Earnings per Share = $ 25 / $ 1.97 = 12.7