The stockholders’ equity section of Sarasota Corp.’s balance sheet at December 3

ID: 2400521 • Letter: T

Question

The stockholders’ equity section of Sarasota Corp.’s balance sheet at December 31 is presented here.

SARASOTA CORP.

Balance Sheet (partial)

Stockholders’ equity

Paid-in capital

Preferred stock, cumulative, 10,833 shares authorized, 6,500 shares issued and outstanding

$ 663,000 Common stock, no par, 729,310 shares authorized, 564,000 shares issued 1,692,000

Total paid-in capital 2,355,000

Retained earnings 1,180,000

Total paid-in capital and retained earnings 3,535,000

Less: Treasury stock (7,800 common shares) 41,600

Total stockholders’ equity $3,493,400

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?

(d) If the annual dividend on preferred stock is $53,040, what is the dividend rate on preferred stock?

(e) If dividends of $72,300 were in arrears on preferred stock, what would be the balance reported for retained earnings?

a) Common Stock outstanding = 564000-7800 = 556200 Shares

b) Stated value of the common Stock = 1692000/564000 = 3 per share

c) Par value of preferred stock = 663000/6500 = 102 per share

d) Dividend rate = 53040*100/663000 = 8%

e) Reported retained earnings = 1180000-72300 = $1107700

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