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Required information Problem 13-4A Analyzing changes in stockholders' equity accounts LO C3, P2, P3 [The following information applies to the questions displayed below.] The equity sections for Atticus Group at the beginning of the year (January 1) and end of the year (December 31) follow. Stockholders' Equity (January 1) Common stock-$5 par value, 100,000 shares authorized, 30,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $150,000 110,000 320,000 $ 580,000 Stockholders' Equity (December 31) Common stock-$5 par value, 100,000 shares authorized, 35,200 shares issued, 4,000 shares in treasury Paid-in capital in excess of par value, common stock Retained earnings ($40,000 restricted by treasury stock) $176,000 146,400 440,000 762,400 (40,000) $722,400 Less cost of treasury stock Total stockholders' equity The following transactions and events affected its equity during the year. Jan. 5 Declared a $0.60 per share cash dividend, date of record January 10. Mar. 20 Purchased treasury stock for cash. Apr. 5 Declared a $0.60 per share cash dividend, date of record April 10. July 5 Declared a $0.60 per share cash dividend, date of record July 10. July 31 Declared a 20% stock dividend when the stock's market value was $12 per share. Aug. 14 Issued the stock dividend that was declared on July 31. Oct. 5 Declared a $0.60 per share cash dividend, date of record October 10.

Answer 1

1) Outstanding shares

	Jan 5	Apr 5	Jul 5	Oct 5
Outstanding shares	30000	30000-4000 = 26000	26000	26000*1.20 = 31200

2) Cash dividend

	Jan 5	Apr 5	Jul 5	Oct 5
Cash dividend	30000*.60 = 18000	26000*.60 = 15600	15600	31200*.60 = 18720

3) capitalization amount = 26000*20%*12 = 62400

4) Cost per share = 40000/4000 = 10

5) Net income = 320000-62400-67920-440000 =250320

Answer 2

Capitalization of retained   earnings for small stock dividend

Number of shares		5,000
Market   value per share		× $10
Total   capitalization		$50,000

Answer 3

Net income
Retained   earnings, beginning balance				$320,000
Less dividends:
5-Jan				-15,000
April 5				-12,500
5-Jul				-12,500
31-Jul				-50,000
5-Oct				-15,000
Total   before net income				$215,000
Plus   net income				?
Retained   earnings, ending balance				$400,000
Therefore,   net income = $185,000				185,000