Stockholders’ Equity Section of the Balance Sheet Please answer original from yo
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Question
Stockholders’ Equity Section of the Balance Sheet
Please answer original from you, don't copy and paste, please.
Answer the following questions in 1,050 words using the Lachlin Corporation Balance Sheet
The stockholders' equity section of Lachlin Corporation's balance sheet at December 31 is presented here.
Stockholders’ Equity
Paid in capital
Preferred stock, cumulative 10,000 shares authorized
6,000 shares issued and Outstanding $ 600,000
Common stock, no par 750,000 shares
580,000 shares issued and outstanding $ 2,900,000
_________
Total paid-in-capital $ 3,500,000
Retained earnings $ 1,158,000
____________
Total paid in capital in retain earnings = $4,658,000
Less: Treasury Stock (6,000 common shares ) $ 32,000
____________
Total stockholders’ equity. $ 4,626,000
1) How many shares of common stock are outstanding?
2) Assuming there is a stated value, what is the stated value of the common stock?
3) What is the par value of the preferred stock?
4) If the annual dividend on preferred stock is $36,000, what is the dividend rate on preferred stock?
5) If dividends of $72,000 were in arrears on preferred stock, what would be the balance reported for retained earnings?
Explanation / Answer
Answer to Part 1.
Number of Common Stock Outstanding = No. of Common Stock issued – No. of stock held as Treasury Stock
Number of Common Stock Outstanding = 580,000 – 6,000
Number of Common Stock Outstanding = 574,000
Answer to Part 2.
Stated Value = Issued Common Stock Capital / No. of Common stock issued
Stated Value = 2,900,000 / 580,000
Stated Value = $5 per Common Stock
Answer to Part 3.
Par Value of Preferred Stock = Issued Preferred Stock Capital / No. of Preferred Stock Issued
Par Value of Preferred Stock = 600,000 / 6,000
Par Value of Preferred Stock = $100
Answer to Part 4.
Annual Dividend on Preferred Stock = No. of Preferred Stock Issued * Par Value * Dividend Rate
$36,000 = 6,000 * $100 * Dividend Rate
$36,000 = 600,000 * Dividend Rate
Dividend Rate = 6%
Answer to Part 5.
The Dividend in arrear will not effect the Retained Earning to be reported. Dividend in arrear will be shown in Notes to Financial Statement. The Dividend once declared will reduce the Retained Earning and Increase the Current Liabilities i.e. Dividend Payable by the amount of Dividend declared.
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