Bruins Inc. has the following items in their current balance sheet: Common Stock 10,000,000 shares authorized,...
Bruins Inc. has the following items in their current balance sheet:
Common Stock 10,000,000 shares authorized, $1,000,000 issued $3,000,000
Capital Surplus $9,000,000
Treasury Stock on Common 100,000 shares $6,000,000
Cumulative Preferred Stock 500,000 authorized
[2%] $100 par $8,000,000
Treasury Stock on Preferred Stock 10000 shares $6,000,000
Retained Earnings $60,000,000
- Bruins Inc. wishes to announce a total cash dividend of $40,000,000. How is this dividend to be split between the common and preferred stockholders?
- What is the dividend per share for common and preferred after the dividend distribution from question 1 above?
- Suppose Bruins Inc. was two years in the arrears in paying dividends to the preferred stockholders, then what is the dollar amount of the preferred and common shareholder dividend?
- How many Bruins common stock shares are outstanding?
- If Bruins Inc. announces a 4 for 1 stock split of the cumulative preferred then what is the new total amount of the preferred stock?
- If Bruins Inc. were to provide for a 10% common stock dividend, then how many new shares are to be mailed to existing shareholders?
- Assume in question [6] the market price of the common stock was $15 at the time of the stock dividend announcement. What is the journal entry to record the stock dividend?
- Using the equity portion of the Bruins Inc. balance sheet above, determine the amount of the total equity in Bruins Inc. Assume this question ignores the results of questions [1-7] above.
- What is the impact of the common and preferred cash dividend [$5,000,000 as per question 1 above] on the current balance sheet of Bruins Inc.?
- What is the impact of the 20% common stock dividend on the balance sheet? Assume this question ignores questions [1-9] above.
Homework Answers
ANSWER :-
Requirement 1
Dividend distribution:
| Preferred | Common | Total | |
| Dividend | 160000 | 39840000 | 40000000 |
Requirement 2
Dividend per share:
| Preferred | Common | |
| Dividend per share | 160000/80000 = 2 | 39840000/900000 = 44.27 |
Requirement 3,4
| Preferred Stock Issued (8000000/100) | 80,000 | |
| Common Stock | Preferred Stock | |
| Issued Share | 1,000,000 | 80,000 |
| Less: Treasury Stock | 100,000 | 10,000 |
| Outstanding Share | 900,000 | 70,000 |
| Cash Divided for | $ 39,580,000 | $ 420,000 |
| Dividedby: Outstanding Share | 900,000 | 70,000 |
| Dividend per Share (In All years) | $ 43.98 | $ 6.00 |
| Divided by: paid for Number of year | 1 | 3 |
| Dividend per Share (per year) | $ 43.98 | $ 2.00 |
| Total cash dividend announce | $ 40,000,000 |
|
Less: Cash Divided for preferred shareholder (70000*$2 = 140000) (Year = 2 arrears + 1 Current year = 3) (140000*3) |
$ 420,000 |
| Cash Divided for common shareholder | $ 39,580,000 |
Requirement 9:
Cash dividends paid t
o common and preferred shared will decrease retained earnings balance in stockholder ' equity with corresponding decrease in cash balance on asset side to the extent of $ 5,000,000.
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