Exercise 11-4 The stockholders\' equity section of Cheyenne Corp.\'s balance she
ID: 2594275 • Letter: E
Question
Exercise 11-4 The stockholders' equity section of Cheyenne Corp.'s balance sheet at December 31 is presented here CHEYENNE CORP Balance Sheet (partial) Stockholders' equity Paid-in capital Preferred stock, cumulative, 9,167 shares authorized, 5,500 shares issued and outstanding $561,000 2,870,000 3,431,000 1,179,000 4,610,000 30,933 $4,579,067 Common stock, no par, 742,241 shares authorized, 574,000 shares issued Total paid-in capital Retained earnings Total paid-in capital and retained earnings Less: Treasury stock (5,800 common shares) Total stockholders' equity From a review of the stockholders' equity section, answer the following questions (a) How many shares of common stock are outstanding? Common stock outstanding (b) Assuming there is a stated value, what is the stated value of the common stock? The stated value of the common stock shares per share (c) What is the par value of the preferred stock? The par value of the preferred stock (d) If the annual dividend on preferred stock is $39,270, what is the dividend rate on preferred stock? The dividend rate per share (e) If dividends of $71,700 were in arrears on preferred stock, what would be the balance reported for retained earnings? The Retained Earnings balanceExplanation / Answer
SOLUTION
(A) Common stock outstanding
= Shares issued - Shares of treasury stock
= 574,000 - 5,800 = 568,200
(B) Stated value of the common stock
= $2,870,000 / 574,000 shares = $5.00 per share
(C) Value of preferred stock
= $561,000 / 5,500 shares = $102 per share
(D) Dividend rate
= $39,270 / $561,000 = 7%
(E) Retained Earning balance = $1,179,000
Dividends in arrears are expected dividends that have not been declared yet. Since dividends are not recorded until they are declared, no entry is made for dividends in arrears, and the balance of retained earnings is not decreased.
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