Homework Answers
1. Option (b) is correct
Outstanding shares = Issued shares - Treasury shares
Outstanding shares = 31000 - 11500 = 19500
2. Option (e) is correct
Earnings per share = Net income - Preferred dividend / Weighted average number of shares outstanding
Earnings per share = ($30780 - $2800) / 8100
Earnings per share = $27980 / 8100 = $3.45 per share
3. Option (a) is correct
Since the preferred shareholders are cumulative, so if in any year their dividend is not paid or partly paid, then it will be carried over to next year.
First years' dividend of preferred shareholders = 1100 * $20 * 5% = $1100
Total dividend paid in first year = $500
Arrear dividend for preferred stockholders = $1100 - $500 = $600
Since the preferred stockholders are cumulative, so their first years' arrear dividend will be paid first in second year before any dividend is paid to common stockholders. Preferred dividend for second year will be same as $1100. Preferred stockholder's second years' total dividend :
Preferred stockholder's second years' total dividend = Arrear dividend + second years' dividend
Preferred stockholders' second years' dividend = $600 + $1100 = $1700.
4. Option (c) is correct
Total cash received from issue of shares = $10600
Total par value of issued shares = 90 * $100 per share = $9000
Paid in capital in excess of par is the amount received from issue of shares in excess of par value. So,
Paid in capital in excess of par = $10600 - $9000 = $1600
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