Question

RCES Problem 11-2A The stockholders' equity accounts of Cheyenne Corp. on January 1, 2017, were as follows. EU0 tudy Preferred Stock (7%, $100 par noncumulative, 4,400 shares authorized) Common Stock ($4 stated value, 310,000 shares authorized) Paid-in Capital in excess of Par Value-Preferred Stock Paid-in Capital in Excess of Stated Value-Common Stock Retained Earnings Treasury Stock (4,400 common shares) $264,000 1,033,333 13,200 496,000 683,500 35,200 During 2017, the corporation had the following transactions and events pertaining to its stockholders' equity. Feb. 1 Mar. 20 Oct. 1 Nov. 1 Dec. Issued 4,620 shares of common stock for $32,340. Purchased 1,250 additional shares of common treasury stock at $8 per share. Declared a 7% cash dividend on preferred stack, payable November 1. Paid the dividend declared on October 1. Declared a $0.85 per share cash dividend to common stockholders of record on December 15, payable Decembe 2017. Determined that net income for the year was $278,200. Paid the dividend declared on December 1. nove sermona radio en e Dec. 31 l en becomes

Answer 1

Journal Entries:

Date	Account Titles and Explanation	Debit	Credit
Feb-01	Cash	32340
	Common Stock (4620 x $4)		18480
	Paid-in capital in Excess of Stated value - Common Stock		13860
	[Issued shares in exchange for cash]
Mar-20	Treasury stock	10000
	Cash		10000
	[Purchased 1250 own shares at $8 per share]
Oct-01	Cash Dividends (264000 x 7%)	18480
	Dividend payable, Preferred		18480
	[Declared cash dividend on preferred stock]
Nov-01	Dividend payable, Preferred	18480
	Cash		18480
	[Paid cash dividend on preferred stock]
Dec-01	Cash Dividends (257303 x $0.85]	218708
	Dividend payable, Common		218708
	[Declared cash dividend on common shares]
Dec-31	Income summary	278200
	Retained Earnings		278200
	[To record net income]
Dec-31	Retained Earnings	237188
	Cash dividends (18480+218708)		237188
	[To close cash dividends]
Dec-31	Dividend payable, Common	218708
	Cash		218708
	[To record payment of cash dividends payable]

T-Accounts:

Preferred Stock
Dec-31	264000	Jan-01	264000
	264000		264000
Common Stock
Dec-31	1051813	Jan-01	1033333
		Feb-01	18480
	1051813		1051813
Paid-in Capital in Excess of Par Value-Preferred Stock
Dec-31	13200	Jan-01	13200
	13200		13200
Paid-in Capital in Excess of Par Value-Common Stock
		Jan-01	496000
Dec-31	509860	Feb-01	13860
	509860		509860
Retained Earnings
Dec-31	237188	Jan-01	683500
Dec-31	724512	Dec-31	278200
	961700		961700
Cash Dividends
Oct-01	18480	Dec-31	237188
Dec-31	218708
	237188		237188
Treasury Stock
Jan-01	35200
Mar-20	10000	Dec-31	45200
	45200		45200

Balance Sheet:

CHEYENNE CORP.
Partial Balance Sheet
As on Dec 31, 2017
Stockholders' Equity
Paid in Capital
Preferred stock	264000
Common Stock	1051813
Total		1315813
Paid-in Capital in Excess of Par Value-Preferred Stock	13200
Paid-in Capital in Excess of Par Value-Common Stock	509860
Total		523060
Total Paid-in capital		1838873
Retained Earnings		724512
Total		2563385
Less:
Treasury stock		-45200
Total Stockholder's equity		2518185

Payout Ratio = Common dividends ÷ Net income = 218708/278200 = 78.6%

Earnings per shares = (Net income-Preferred dividend)/Common shares outstanding = (278200-18480)/257303 = $1.00

Return on Common Stock holder's Equity = (Net income-Preferred dividend)/Average Common Stockholder's Equity = (278200-18480)/1051813 = 24.69%

Calculations:

	Shares
Beginning Common Shares (1033333/$4)	258333
Beginning Treasury Stock	-4400
Issued	4620
Treasury stock	-1250
Ending Outstanding Common shares	257303

Cash dividend payable to common stockholders = 257303 x $0.85 = $218,708