The equity sections from Salazar Group’s 2011 and 2012 year-end balance sheets f
ID: 2387760 • Letter: T
Question
The equity sections from Salazar Group’s 2011 and 2012 year-end balance sheets follow.Stockholders’ Equity (December 31, 2011)
Common stock—$6 par value, 50,000 shares
authorized, 35,000 shares issued and outstanding $ 210,000
Paid-in capital in excess of par value, common stock 170,000
Retained earnings 340,000
Total stockholders’ equity $ 720,000
Stockholders’ Equity (December 31, 2012)
Common stock—$6 par value, 50,000 shares
authorized, 41,200 shares issued, 4,000 shares in treasury $ 247,200
Paid-in capital in excess of par value, common stock 219,600
Retained earnings ($60,000 restricted by treasury stock) 400,000
866,800
Less cost of treasury stock (60,000 )
Total stockholders’ equity $ 806,800
The following transactions and events affected its equity during year 2012.
Jan. 5 Declared a $0.40 per share cash dividend, date of record January 10.
Mar. 20 Purchased treasury stock for cash.
Apr. 5 Declared a $0.40 per share cash dividend, date of record April 10.
July 5 Declared a $0.40 per share cash dividend, date of record July 10.
July 31 Declared a 20% stock dividend when the stock’s market value is $14 per share.
Aug. 14 Issued the stock dividend that was declared on July 31.
Oct. 5 Declared a $0.40 per share cash dividend, date of record October 10.
Explanation / Answer
Jan 5 20,000 shares Apr 5 18,500 shares (20,000 - 1,500 shares of treasury stock) July 5 18,500 shares Oct 5 22,200 [18,500 + 3,700 (18,500 x 20%)] (2) Jan 5 $10,000 (20,000 x .50) Apr 5 $9,250 (18,500 x .50) July 5 $9,250 Oct 5 $11,100 (22,200 x .50) (3) $44,400 (3,700 shares x $12 per share) (4) $10 per share ($15,000 / 1,500 shares) (5)* Retained earnings Dec 31 $200,000 Add back dividends $84,000 [$10,000 + 9,250 + 9,250 + 11,100 + 44,400] Minus Retained earnings Jan 1 ($160,000) Equals net income $84,400 *(5) would be easier to understand using a T-account, but I can't draw one on here
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