The stockholders’ equity section of Fauberg Marigny Corporation at December 31 i
ID: 2403264 • Letter: T
Question
The stockholders’ equity section of Fauberg Marigny Corporation at December 31 is as follows.
From a review of the stockholders’ equity section, answer the following questions.
1)How many shares of common stock are outstanding?
2) Assuming there is a stated value, what is the stated value of the common stock?Stated value of common stock per share.
3)What is the par value of the preferred stock?
per share
4)
If the annual dividend on preferred stock is $18,000, what is the dividend rate on preferred stock?
5)
If dividends of $36,000 were in arrears on preferred stock, what would be the balance in retained earnings?
Balance Sheet (partial) Stockholders' equity Paid-in capital Preferred stock, cumulative, 10,000 shares authorized,
5,000 shares issued and outstanding $300,000 Common stock, no par, 750,000 shares authorized,
300,000 shares issued 1,500,000 Total paid-in capital 1,800,000 Retained earnings 2,050,000 Total paid-in capital and retained earnings 3,850,000 Less: Treasury stock (5,000 common shares) (64,000 ) Total stockholders' equity $3,786,000
Explanation / Answer
Answer 1.
Number of common stock issued = 300,000
Number of common stock purchased as treasury stock = 5,000
Number of common stock outstanding = Number of common stock issued - Number of common stock purchased as treasury stock
Number of common stock outstanding = 300,000 - 5,000
Number of common stock outstanding = 295,000
Answer 2.
Value of Common Stock = $1,500,000
Number of common stock issued = 300,000
Stated Value of the common stock = Value of Common Stock / Number of common stock issued
Stated Value of the common stock = $1,500,000 / 300,000
Stated Value of the common stock = $5.00
Answer 3.
Value of Preferred Stock = $300,000
Number of preferred stock issued = 5,000
Par Value of the preferred stock = Value of Preferred Stock / Number of preferred stock issued
Par Value of the preferred stock = $300,000 / 5,000
Par Value of the preferred stock = $60.00
Answer 4.
Annual dividend on preferred stock = $18,000
Number of preferred stock issued = 5,000
Dividend rate on preferred stock = Annual dividend on preferred stock / Number of preferred stock issued
Dividend rate on preferred stock = $18,000 / 5,000
Dividend rate on preferred stock = $3.60
Answer 5.
Balance of Retained Earnings = Retained Earnings - Preferred stock dividend in arrear
Balance of Retained Earnings = $2,050,000 - $36,000
Balance of Retained Earnings = $2,014,000
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