Question

Common stock (par $1; no changes during the current year). Shares authorized 10,000,000. Shares issued, ? issue price $10 per share. Shares held as treasury stock, 53,000 shares, cost $11 per share. Net income for the current year, $1,672,100 Common Stock account, $780,000. Dividends declared and paid during the current year, $1 per share. Retained Earnings balance, beginning of year, $36,700,000. Required: Complete the following: (Round per share to 2 decimal places.) 780,000 2 Shares issued Shares outstanding The balance in Additional Paid-in Capital would be Earnings per share is Total dividends paid on common stock during the current year is Treasury stock should be reported in the stockholders' equity section of the balance sheet in the amount of Assume that the board of directors voted a 2-for-1 stock split. After the stock split the par value per share will be

Answer 1

ANSWER

1. Shares issued = Common stock / Par value per share = $780,000 / $1 = 780,000 shares

Shares outstanding = Shares issued - Treasury stock = 780,000 - 53,000 = 727,000 shares

2. Balance in Additional paid-in capital = No. of shares issued x (Issue price - Par value)

= 780,000 shares x ($10 - $1)

= $7,020,000

3. Earnings per share = Net income / Shares outstanding

= $1,672,100 / 727,000

= $2.3

4. Total dividends paid on common stock during the current year = Dividend per share x No. of shares outstanding

= $1 x 727,000

= $727,000

5. Treasury stock to be reported in the equity section = No. of shares of Treasury stock x Cost per share

= 53,000 x $11

= $583,000

6. Par value of the share after stock split = $1 x 1/2 = $0.50

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