Question

The stockholders’ equity section of The Seventies Shop is presented here.

THE SEVENTIES SHOP
Balance Sheet (partial)
($ in thousands)
Stockholders' equity:
Preferred stock, $50 par value $ 0
Common stock, $5 par value 15,000
Additional paid-in capital 45,000

Total paid-in capital 60,000
Retained earnings 48,000
Treasury stock (2,700)

Total stockholders' equity $ 105,300



Based on the stockholders’ equity section of The Seventies Shop, answer the following questions. Remember that all amounts are presented in thousands.


How many shares of preferred stock have been issued?


How many shares of common stock have been issued?


Total paid-in capital is $60 million. At what price per share were the common shares issued?


If retained earnings at the beginning of the period was $40 million and net income during the year was $10,850,000, how much was paid in dividends for the year?




If the treasury stock was reacquired at $18 per share, how many shares were reacquired?




How much was the dividend per share? (Hint: Dividends are not paid on treasury stock.)



Please show work so i can understand. Thanks :)

Answer 1

I'll give you the information you need to compute the answers easily.

1.) How many shares of preferred stock have been issued?

Since the dollar amount of preferred stock is $0, no preferred stock has been issued.

2.) How many shares of common stock have been issued?

Divide the $15,000,000 by the $5 par value per share to get the number of shares.
$15,000/$5 per share = ?

3.) Total paid-in capital is $60 million. At what price per share were the common shares issued?

Additional paid-in capital is the amount that the shares were issued for in excess of the par value. In this case, the additional paid-in capital will onlybe connected to the common stock since we did not issue any preferred stock.

To compute the issue price, divide the total paid-in capital amount ($60 million) by the number of shares you computed in #2.

4.) If retained earnings at the beginning of the period was $40 million and net income during the year was $10,850,000, how much was paid in dividends forthe year?

You will need to use this formula:
Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends

Plug in what we know (in thousands $):
$48,000 = $40,000 + $10,850 - Dividends

Solve for Dividends algebraically.

5.) If the treasury stock was reacquired at $18 per share, how many shares were reacquired?

Divide the total amount for Treasury Stock, ($2.7 million), by the $18 per share amount to get the number of shares.

Treasury Stock is negative because it is stock that we have bought back. Therefore, it lessens the equity value on our balance sheet.


6.) How much was the dividend per share? (Hint: Dividends are not paid on treasury stock.)

Divide the Dividends amount you computed in #4 by the number of shares you computed in #2

Hope that helps. Please rate.