Kilgore Auto Parts reported the following information at December 31, 2004: Pref

Question

Kilgore Auto Parts reported the following information at December 31, 2004: Preferred stock, 10%, $50 par, cumulative; $ 50,000 Common stock, $1 par, 40,000 Additional paid-in capital - Common 50,000 Retained earnings 30,000 Total contributed capital and retained earnings $170,000 Less: Treasury stock (100 common shares at cost) (5,000) Total stockholders' equity $165,000 _____________ 1. How many shares of common stock are issued? _____________ 2. How many shares of preferred stock are issued? _____________ 3. How many common shares are outstanding? _____________ 4. What is the dividend per share that preferred shareholders

Explanation / Answer

1. C/S issued =40,000 / 1 = 40,000 2. P/S issued = 50,000 /50 = 1,000 3. Shares issued = 40,000, shares repurchased (treasury) = 100, Shares outstanding = 40,000 - 100 = 39,900 4. Dividends per share = 50 * 10% =5.0 5. Average price = (C/S + APIC) / # of shares = (40,000 + 50,000) / 40,000 = $2.25 6. Total Stockholders' equity will not change. This is because, we will debit Retained Earnings, and Credit Common Stocks. This will result in reduction of retained earnings and increase in common stocks at the same amount. As a result, total stockholders' equity will not change.

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