Question

Current Attempt In Progress The stockholders'equity accounts of Novak Corp. on January 1, 2022, were as follows. Preferred Stock (7%, $100 par noncumulative, 12,500 shares authorized) $750,000 Common Stock ($4 stated value, 750,000 shares authorized) 2,500,000 Paid-in Capital in Excess of Par Value-Preferred Stock 37,500 Paid-in Capital in Excess of Stated Value-Common Stock 1,200,000 Retained Earnings 1,720,000 Treasury Stock (12,500 common shares) 100,000 During 2022, the corporation had the following transactions and events pertaining to its stockholders' equity. Feb. 1 Issued 12,500 shares of common stock for $75,000 Mar. 20 Purchased 2,500 additional shares of common treasury stock at $7 per share. Oct. 1 Declared a 7% cash dividend on preferred stock, payable November 1. Nov. 1 Paid the dividend declared on October 1. Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on December 15. payable December 31, 2022. Dec. 31 Determined that net income for the year was $700,000. Paid the dividend declared on December 1. Your answer is partially correct.

Answer 1

Credit Calculation Novak Corporation Date Account 1-Feb Cash Common Stock Paid-in Capital in Excess of Stated Value-Common Stock Debit 75,000 =12,500*4 50,000 25,000 17,500 =2,500*7 20-Mar Treasury Stock Cash 17,500 52,500 =750,000*7% 1-Oct Cash Dividends Dividends Payable 52,500 52,500 1-Nov Dividends Payable Cash 52,500 311,250 Wkgs below 1-Dec Cash Dividends Dividends Payable 311,250 700,000 31-Dec Income Summary Retained Earnings 700,000 363,750 =311,250+52,500 31-Dec Retained Earnings Cash Dividends 363,750 311,250 31-Dec Dividends Payable Cash 311,250 =2,500,000/4 Workings Common Dividend Opening Shares 625,000 Shares Issued 12,500 Number of Common Shares Issued 637,500 Treasury Stock - opening balance (12,500) Treasury Stock purchased (2,500) Number of Common Shares 0/s 622,500 Common Dividend per share 0.50 Common Dividend Declared 311,250 Dividend is paid on 0/s common shares excluding treasury shares =622,500*0.50 Note

Novak Corporation T Accounts Date Debit Date Preferred Stock 1/1 Bal Credit Date Debit Date Credit Common Stock 1/1 Bal $2,500,000 1-Feb $ 50,000 $ 750,000 12/31 Bal $ 750,000 Paid in Capital in Excess of Par Value-PS 1/1 Bal $ 37,500 12/31 Bal $2,550,000 Paid in Capital in Excess of Stated Value-CS 1/1 Bal $1,200,000 1-Feb $ 25,000 12/31 Bal $ 37,500 Retained Earnings 1/1 Bal $1,720,000 31-Dec $ 363,750 31-Dec $ 700,000 12/31 Bal $1,225,000 Cash Dividends 1-Oct $ 52,500 1-Dec $311,250 31-Dec $ 363,750 12/31 Bal $ - 12/31 Bal $2,056,250 Treasury Stock 100,000 17,500 1/1 Bal $ 20-Mar $ 12/31 Bal $ 117,500

750,000 2,550,000 3,300,000 Novak Corporation Partial Balance Sheet As of December 31, 2022 Stockholders Equity Paid in capital Capital Stock Preferred Stock Common Stock Total Capital Stock Additional Paid in capital Paid in Capital in Excess of Par Value-Preferred Stock Paid in Capital in Excess of Stated Value-Common Stock Total Additional Paid in Capital Total Paid in Capital Retained Earnings Total Paid in Capital and Retained Earnings Less: Treasury Stock Total Stockholders Equity 37,500 1,225,000 1,262,500 4,562,500 2,056,250 6,618,750 (117,500) 6,501,250

Ratios Payout Ratio Dividends paid / Net Income =363,750/700,000 51.96% Payout Ratio Earnings per share Net Income-Preferred Dividends / Average No. of Common Shares Outstanding =(700,000-52,500)/((622,500+625,000-12,500)/2) $ 1.05 Earnings per share Return on common stockholders equity Net Income-Preferred Dividends / Average Common Equity =(700,000-52,500)/((5,320,000+5,713,750)/2) 11.74% Return on common stockholders equity Workings Common stockholders equity - Common Stock Paid in Capital in Excess of Stated Value-Common Stock Retained Earnings Less: Treasury Stock Total Stockholders Equity 1-Jan 2,500,000 1,200,000 1,720,000 (100,000) 5,320,000 31-Dec 2,550,000 1,225,000 2,056,250 (117,500) 5,713,750