The stockholders’ equity accounts of Miley Corporation on January 1, 2014, were

Question

The stockholders’ equity accounts of Miley Corporation on January 1, 2014, were as follows.

During 2014, the corporation had the following transactions and events pertaining to its stockholders’ equity.

Determined that net income for the year was $280,900. Paid the dividend declared on December 1.

1. Journalize the transactions.

2. Enter the beginning balances in the accounts and post the journal entries to the stockholders’ equity accounts.

3. Prepare the stockholders’ equity section of the balance sheet at December 31, 2014.

4. Calculate the payout ratio, earnings per share, and return on common stockholders’ equity.

   a) Payout Ratio %

   b) Earnings per share $

   c) Return on common stockholders' equity %

Preferred Stock (8%, $100 par noncumulative, 4,300 shares authorized) $258,000 Common Stock ($3 stated value, 342,800 shares authorized) 822,720 Paid-in Capital in Excess of Par Value—Preferred Stock 12,900 Paid-in Capital in Excess of Stated Value—Common Stock 274,240 Retained Earnings 680,900 Treasury Stock—(4,300 common shares) 34,400

Explanation / Answer

1 Journal Entries

3 Stock holder's Equity Account

4.(a) Payout ratio = Dividend paid/Earning available for distribution

Earnings available for distribution = 680900-20640 = 660260

Pay out ratio = 195468/660260 = 0.30

(b) EPS = Earning available for distibution/No. of equity share holders

= 660260/279240 = 2.36

(c) Return on equity = 660260/837720 = 78.81

Date Particulars Debit($) Credit($) Feb1 Cash A/c Dr. 30000 To common stock 15000 To paid in capital in excess of stated value- common stock 15000 Mar20 Treasury stock A/c Dr. 8000 To Bank 8000 Oct 1 - No Entry - Nil Nil Nov1 Dividend-Prefferd stock A/c Dr. 20640 To Bank A/c 20640 Dec 1 - No Entry - Nil Nil Dec31 Dividend-Common stock A/c Dr. 195468 To Bank A/c 195468

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