Question

The stockholders’ equity section of Velcro World is presented here.

VELCRO WORLD
Balance Sheet (partial)
($ and shares in thousands)
Stockholders' equity:
Preferred stock, $1 par value	$	4,600
Common stock, $1 par value		16,000
Additional paid-in capital		401,000
Total paid-in capital		421,600
Retained earnings		274,000
Treasury stock, 12,000 common shares		(216,000	)
Total stockholders' equity	$	479,600

Based on the stockholders' equity section of Velcro World, answer the following questions. Remember that all amounts are presented in thousands.

Required information (The following information applies to the questions displayed below.) The stockholders' equity section of Velcro World is presented here. VELCRO WORLD Balance Sheet (partial) ($ and shares in thousands) Stockholders' equity: Preferred stock, $1 par value Common stock, $1 par value Additional paid-in capital Total paid-in capital Retained earnings Treasury stock, 12,000 common shares Total stockholders' equity $ 4,600 16,000 401,000 421,600 274,000 (216,000) $ 479,600 Based on the stockholders' equity section of Velcro World, answer the following questions. Remember that all amounts are presented in thousands Required: 1. How many shares of preferred stock have been issued? (Enter you answer in total number of shares, not in thousands.) Number of shares 4,600

Answer 1

1) How many shares of preferred stock have been issued. Number of shares = $4,600.000 / $1 per share 4,600,000 2) How many shares of common stock have been issued. Number of shares = $16.000.000 / $1 per share 16,000,000 = 3) If the common shares were issued at $16 per share, at what price per share were the preferred shares issued. Common stock (16,000,000 * $1) Additional paid-in capital - Common stock [16,000,000 * ($16 - $1)] $16,000,000 $240,000,000 $161,000,000 35.0 Additional paid-in capital - preferred stock [$401,000,000 - $240,000,000] The price per share of the preferred shares issued = $1+($161.000.000 / 4,600,000 shares) = $1 + $35 $36 per share 4) If retained earnings at the beginning of the period was $236 million and $16 million was paid in dividends during the year, what was the net income for the year. Millions Retained earning beginning of the year $236 Add: Net Income ($274 + $16 - $236) $54 $290 Less: Dividends $16 Retained Ending beginning of the year $274 Net Income $54 millions 5) What was the average cost per share of the treasury stock acquired. Average cost per share = $216,000,000 / 12,000,000 $18 per share