The stockholders\' equity section of a balance sheet at December 31, 2015, is as

Question

The stockholders' equity section of a balance sheet at December 31, 2015, is as follows:

A) What was the average issue price of the preferred stock?

$ per share

B) What was the average issue price of the common stock?

$ per share

C) What will be the retained earnings account balance immediately following a 2-for-1 stock split?

$

D) If the company's board of directors declares a cash dividend consisting of the annual stated dividend rate for preferred stockholders plus $1 per share for common stockholders, what is the total amount of dividends to be paid and what would be the remaining balance in the retained earnings account immediately following the declaration of this cash dividend?

Total dividends: $

Retained earnings: $

7% Preferred Stock, $1 par, 10,000 shares authorized, 3,000 shares issued $3,000 Common Stock, $1 par, 150,000 share authorized, 10,000 shares issued 10,000 Paid-in Capital in Excess of Par: Preferred Stock 9,000 Common Stock 20,000 Total Capital Stock 42,000 Retained Earnings 150,000 Less: Treasury Stock (1,000 common shares at cost) 6,000 Total Stockholders' Equity $186,000

Explanation / Answer

A)Average issue price = (Par value + in excess of par) /number of shares

                           = (3000+9000)/ 3000 = 12000 /3000 =$ 4 per share

B)Average price = (10000+20000)/10000 = 30000/10000

                   = $ 3 per share

c)No effect of stock split on retained earning .Balance = $ 150,000

D)Preferred dividend = 3000*.07 = 210

common stock = 1 * 10000 = $ 10000

Total dividend = 10210

Retained earning = 150000-10210 = 139790

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