The stockholders\' equity section of the balance sheet for Atkins Co. at 12-31-2

Question

The stockholders' equity section of the balance sheet for Atkins Co. at 12-31-2011, is as follows.
Stockholders' Equity
Paid-in capital
Preferred stock, ? par value, 6% cumulative,
50,000 shares authorized,
40,000 shares issued and outstanding = $400,000
Common stock, $10 stated value,
150,000 shares authorized,
60,000 shares issued and ? outstanding = 600,000
Paid-in capital in excess of par-preferred = 30,000
Paid-in capital in excess of par-common = 200,000
Total paid-in capital =$1,230,000
Retained earnings = 250,000
Treasury stock, 2,000 shares = (50,000)
Total stockholders' equity = 1,430,000

Note: The market value per share of the common stock is $25, and the market value per share of the preferred stock is $12.
Required
a. What is the par value per share of the preferred stock?
b. What is the dividend per share on the preferred stock?
c. What is the number of common stock shares outstanding?
d.What was the average issue price per share (price for which the stock was issued) of the common stock?
e. Explain the difference between the average issue price and the market price of the common stock?
f. If Atkins declared a 2-for-1 stock split on the common stock, how many shares would be outstanding after the split? What amount would be transferred from the retained earnings account because of the stock split? Theoretically, what would be the market price of the common stock immediately after the stock split?

Explanation / Answer

a) 400,000/40,000sh=$10/sh par value pref stock b) $10/sh*6%=$.60/sh div per sh-pref. stock c) 600,000/$10/sh=60,000 sh d) $600,000+$200,000=$800,000 $800,000/60,000=$13.33 average price of common stock e) Average price is the issuing price at the different dates, at which the market price may differ at each issuing date. f) 60,000*2=120,000 shares outstanding. Will be no transfer from Retained Earnings. After split: $10/2=$5/sh

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