Question

The Stockholders' Equity section of the balance sheets for Klee Corporation on December 31, 2018, and December 31, 2019. along with other selected account balances on the two dates is provided below. (Certain information is missing from the statements.) In 2019, the following transactions affecting equity occurred: a. Additional shares of common stock were issued in April. No other common stock was issued during the year. b. A cash dividend of $1 per share was declared and paid on common stock in December. c. The Treasury Stock-Preferred was purchased at par in January. d. Additional preferred stock was issued for cash in July. e. The yearly cash dividend of $1 per share was declared and paid on preferred stock outstanding as of December 3, 2019. 2019 2018 $ 80,000 $ Stockholders' Equity Paid-in Capital Preferred Stock (5 percent, $20 par, authorized 20,000 shares) Issued Paid-in Capital in Excess of Par Value- Preferred Common Stock ($10 par value, 200,000 shares authorized) Issued Paid-in Capital in Excess of Par Value-Common 60,000 -8- 500 500,000 750,000 10,000

Answer 1

1. Preferred Stock outstanding = ($80000-10000)/20 = 3500 shares

2. Common Stock outstanding = $750000/10 = 75000 shares

3. Preferred stock purchased as treasury stock = 10000/20 = 500 shares

4. Preferred shares issued for cash = (80000-60000)/20 = 1000 shares

5. Sales Price per share of preferred stock issued = (80000-60000+500)/1000= $20.50 per share

6. Cash Dividend on Preferred Stock = 3500 x $20 x 5% = $3500

7. Cash Dividend on Common Stock = 75000 x $1 = $75000

Yearly Dividend Reduction = 500 x $1 = $500