The stockholders\' equity section of Traylor Corporation\'s balance sheet at Dec

Question

The stockholders' equity section of Traylor Corporation's balance sheet at December 31 is presented here. Taylor Corporation Balance Seet (partial) Stockholders equity Paid-in capital Preferred stock, cummulative, 10,000 shares authorized, 6,000 shares issued and outstanding 600,000 Common stock, no par, 750,000 shares authorized, 580,000 shares issued 2,900,000 Total paid in capital 3,500,000 Retained earnings 1,158,000 Total paid-in capital and retained earnings 4,658,000 Less: Treasury stock (6,000 common shares) (32,000) Total stockholders equity =4,626,000 From a review of the stockholders' equity section, answer the following questions. a) How many shares of common stock are outstanding? b) Assuming there is a stated value, what is the stated value of the common stock? c) What is the par value of the preffered stock? d) If the annual dividend on preferred stock is $36,000 , what is the dividened rate on preferred stock? e) If dividends of $72,000 were in arrears on preferred stock, what would be the balance reported for retained earnings?

Explanation / Answer

(a) 651,100 shares issued - 8,920 shares of treasury stock = 642,180 shares outstanding (b) $2,799,730 / 651,100 shares = $4.30 per share (c) $654,720 / 6,400 shares = $102.30 per share (d) $37,600 / $654,720 = 5.74% (e) $1,162,980. Dividends in arrears are expected dividends that have not been declared yet. Since dividends are not recorded until they are declared, no entry is made for dividends in arrears, and the balance of retained earnings is not decreased.

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