Question 3a Preparing a stockholders\' equity section When Duke Corporation was
ID: 2596179 • Letter: Q
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Question 3a
Preparing a stockholders' equity section
When Duke Corporation was incorporated in 2003, authorization was obtained to issue 200,000 shares of $5 par value common stock and 6,000 shares of 8% cumulative preferred stock. The preferred stock has a par value of $100. All the preferred stock was issued at $105 per share, and 110,000 shares of the common stock were sold for $8 per share. The operations of the company resulted in a net loss of $18,000 in 2003 and net income of $120,000 in 2004. In 2005, net income was $348,000, and the cash position was sufficient to allow the board of directors to declare a cash dividend of $1 per share to the common shareholders, as well as satisfy all preferred stock dividend requirements.
Complete in good form the stockholders' equity section of Duke Corporation's balance sheet at December 31, 2005. (Hint: First determine the total amount of dividends declared in 2005.)
Stockholders’ equity:
8% preferred stock, $100 par value, 6,000 shares authorized
and issued.................................................................................
$
Common stock, $5 par value, 200,000 shares authorized,
________shares issued.................................................................................
______
Total paid-in capital.................................................................................
______
Total stockholders’ equity.................................................................................
$
How many shares of common stock are issued?
What is the amount of dividends issued to preferred stockholders?
What is the total paid in capital?
Stockholders’ equity:
8% preferred stock, $100 par value, 6,000 shares authorized
and issued.................................................................................
$
Common stock, $5 par value, 200,000 shares authorized,
________shares issued.................................................................................
______
Total paid-in capital.................................................................................
______
Total stockholders’ equity.................................................................................
$
Explanation / Answer
Stockholders’ equity: 8% preferred stock, $100 par value, 6,000 shares authorized $ 600,000 and issued Common stock, $5 par value, 200,000 shares authorized, $ 550,000 110000shares issued Paid in capital in excess of par-Preferred stock $ 30,000 Paid in capital in excess of par-Common stock $ 330,000 Total paid-in capital $ 1,510,000 Retained earnings $ 196,000 Total stockholders’ equity $ 1,706,000 How many shares of common stock are issued? $ 110,000 What is the amount of dividends issued to preferred stockholders? (Dividends for 3 years--2003, 2004 and 2005 = 600000*8%*3 = $ 144,000 What is the total paid in capital? $ 1,510,000 CALCULATION FOR RETAINED EARNINGS BALANCE AS ON 12.31.2005: Net loss of 2003 $ (18,000) Net lncome of 2004 $ 120,000 Net Income of 2005 $ 348,000 Cumulative net income $ 450,000 Less: Preferred dividends paid for the 3 years $ 144,000 Common stock dividends paid at $1 per share (110000*1) $ 110,000 Balance of retained earnings as on December 31, 2005 $ 196,000
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