Exercise 11-11 The stockholders\' equity section of Haley Corporation at Decembe
ID: 2515270 • Letter: E
Question
Exercise 11-11 The stockholders' equity section of Haley Corporation at December 31 is as follows HALEY CORPORATION Balance Sheet(Partial) Paid-in capital Preferred stock, cumulative, 14,000 shares authorized, 8,400 shares issued and $420,000 1,120,000 1,540,000 1,858,000 3,398,000 40,600 $3,357,400 outstanding Common stock, no par, 740,000 shares authorized, 560,000 shares issued Total paid-in capital Retained earning:s Total paid-in capital and retained earnings Less: Treasury stock (7,000 common shares) Total stockholders' equity From a review of the stockholders' equity section, as chief accountant, write a memo to the president of the company answering 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? (c) What is the par value of the preferred stock? (d) If the annual dividend on preferred stock is $50,400, what is the dividend rate on preferred stock? (e) Earnings? shares per share per share If dividends of $100,800 were in arrears on preferred stock, what would be the balance in RetainedExplanation / Answer
Answer a
Number of shares of common stock outstanding = Common shares issued - Common shares in Treasury stock
= 560,000 - 7,000 = 553,000 shares
Answer b
Stated value per share = Total common stock value / Common shares issued = $1,120,000 / 560,000 = $2 per share
Answer c
Par value of preferred stock = Total preferred stock value / Preferred shares issued = $420,000 / 8,400 = $50 per share
Answer d
Dividend rate on preferred stock = (Dividend amount / Total preferred stock value) * 100
= ($50,400 / $420,000) * 100 = 12 %
Answer e
Balance in Retained Earnings = $1,858,000
Explanation : Since arrears on preferred stock are not declared thus does not form the part of balance sheet. It is disclosed in the notes to accounts . Therefore as it does not impact in balance sheet , thus retaind earning balance remains same at $1,858,000
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