Fill in the blanks for the missing elements in the following three statements: Corporation _____________ transactions are tracked in two different accounts;  ________________accounts track owner contributions separately from earnings. Earnings and earning distributions are tracked in the __________________________ account. Stock Example 1: Longpre Inc. is authorized to issue 1,500,000 shares of its $1 par value common stock and 400,000 shares of $50 par value preferred stock. Longpre plans to sell 20,000 shares of common stock at $38.50 and 1,000 shares of its preferred stock at $55 per share. How much capital will Longpre generate by this sale? What would be Longpre’s legal capital? Stock Example 2: Howe Corporation plans to issue 7,400 shares of its $1 par value common stock for $34 per share and 800 shares of its $30 par value preferred stock for $33 per share. What would Howe’s legal capital be? What would be the amount of capital received in excess of the par value of common and preferred stock? Why is a distinction made between legal capital and total capital? Corporation Dividend Examples - Situation 1:Assume a company has 100,000 shares of common stock with a $1 par value outstanding when it declares a 2 for 1 stock split. After the split, how many shares are outstanding and what is the par value? Situation 2: Assume a company has 100,000 shares of common stock with a $1 par value outstanding when it declares a 1 for 4 reverse stock split. After the split, how many shares are outstanding and what is the par value? Situation 3:Assume that the Board of Directors of ABC Corporation meets on April 1 and declares a dividend of $500,000 payable on June 1 to stockholders of record on May 1. ABC Company currently has 100,000 shares of common stock and 20,000 shares of $100 par, 8% preferred stock outstanding. What happens on each date and how large is the dividend for each class of stock? Situation 4:Now assume dividends are 2 years in arrears for the information listed above. What is the dividend for common stockholders? More Dividend Examples – Dividends in ArrearsDeWine Corporation had the following stocks issued and outstanding when the board of directors proposed a $450,000 dividend:Preferred stock: 40,000 shares issued and 36,000 shares outstanding, 8%, $30 parCommon stock: 100,000 shares issued and 90,000 shares outstanding, $1 parDetermine the amount of dividends each class of stock would receive given the assumptions provided below. Also - determine the divided per share for preferred and common stock in each of the scenarios. Situation 1: Preferred stock is noncumulative:Dividend per share – Situation 1:************************************************************Situation 2: Preferred stock is cumulative (two years in arrears):Dividend per share – Situation 2: *****************************************************************Situation 3: Preferred stock is cumulative (one year in arrears):Dividend per share – Situation 3:

Fill in the blanks for the missing elements in the following three statements: Corporation _ transactions are tracked in two different accounts;  accounts track owner contributions separately from earnings. Earnings and earning distributions are tracked in the ______________ account. Stock Example 1: Longpre Inc. is authorized to issue 1,500,000 shares of its $1 par value common stock and 400,000 shares of $50 par value preferred stock. Longpre plans to sell 20,000 shares of common stock at $38.50 and 1,000 shares of its preferred stock at $55 per share. How much capital will Longpre generate by this sale? What would be Longpre’s legal capital? Stock Example 2: Howe Corporation plans to issue 7,400 shares of its $1 par value common stock for $34 per share and 800 shares of its $30 par value preferred stock for $33 per share. What would Howe’s legal capital be? What would be the amount of capital received in excess of the par value of common and preferred stock? Why is a distinction made between legal capital and total capital? Corporation Dividend Examples - Situation 1:Assume a company has 100,000 shares of common stock with a $1 par value outstanding when it declares a 2 for 1 stock split. After the split, how many shares are outstanding and what is the par value? Situation 2: Assume a company has 100,000 shares of common stock with a $1 par value outstanding when it declares a 1 for 4 reverse stock split. After the split, how many shares are outstanding and what is the par value? Situation 3:Assume that the Board of Directors of ABC Corporation meets on April 1 and declares a dividend of $500,000 payable on June 1 to stockholders of record on May 1. ABC Company currently has 100,000 shares of common stock and 20,000 shares of $100 par, 8% preferred stock outstanding. What happens on each date and how large is the dividend for each class of stock? Situation 4:Now assume dividends are 2 years in arrears for the information listed above. What is the dividend for common stockholders? More Dividend Examples – Dividends in ArrearsDeWine Corporation had the following stocks issued and outstanding when the board of directors proposed a $450,000 dividend:Preferred stock: 40,000 shares issued and 36,000 shares outstanding, 8%, $30 parCommon stock: 100,000 shares issued and 90,000 shares outstanding, $1 parDetermine the amount of dividends each class of stock would receive given the assumptions provided below. Also - determine the divided per share for preferred and common stock in each of the scenarios. Situation 1: Preferred stock is noncumulative:Dividend per share – Situation 1:Situation 2: Preferred stock is cumulative (two years in arrears):Dividend per share – Situation 2: *****Situation 3: Preferred stock is cumulative (one year in arrears):Dividend per share – Situation 3:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Related questions

Question

Stock Example 1: Longpre Inc. is authorized to issue 1,500,000 shares of its $1
par value common stock and 400,000 shares of $50 par value preferred stock. Longpre
plans to sell 20,000 shares of common stock at $38.50 and 1,000 shares of its preferred
stock at $55 per share. How much capital will Longpre generate by this sale? What
would be Longpre’s legal capital?

Stock Example 2: Howe Corporation plans to issue 7,400 shares of its $1 par value
common stock for $34 per share and 800 shares of its $30 par value preferred stock for
$33 per share. What would Howe’s legal capital be? What would be the amount of
capital received in excess of the par value of common and preferred stock? Why is a
distinction made between legal capital and total capital?

Corporation Dividend Examples -

Situation 1:
Assume a company has 100,000 shares of common stock with a $1 par value
outstanding when it declares a 2 for 1 stock split. After the split, how many shares are
outstanding and what is the par value?

Situation 2:

Assume a company has 100,000 shares of common stock with a $1 par value
outstanding when it declares a 1 for 4 reverse stock split. After the split, how many
shares are outstanding and what is the par value?

Situation 3:
Assume that the Board of Directors of ABC Corporation meets on April 1 and declares a
dividend of $500,000 payable on June 1 to stockholders of record on May 1. ABC
Company currently has 100,000 shares of common stock and 20,000 shares of $100
par, 8% preferred stock outstanding. What happens on each date and how large is the
dividend for each class of stock?

Situation 4:
Now assume dividends are 2 years in arrears for the information listed above. What is
the dividend for common stockholders?

More Dividend Examples –

Dividends in Arrears
DeWine Corporation had the following stocks issued and outstanding when the board of
directors proposed a $450,000 dividend:
Preferred stock: 40,000 shares issued and 36,000 shares outstanding,
8%, $30 par
Common stock: 100,000 shares issued and 90,000 shares outstanding,
$1 par
Determine the amount of dividends each class of stock would receive given the
assumptions provided below. Also - determine the divided per share for preferred and
common stock in each of the scenarios.

Situation 1: Preferred stock is noncumulative:
Dividend per share – Situation 1:
************************************************************
Situation 2: Preferred stock is cumulative (two years in arrears):
Dividend per share – Situation 2:

*****************************************************************
Situation 3: Preferred stock is cumulative (one year in arrears):
Dividend per share – Situation 3:

Expert Solution

Step 1

Retained earnings accounts refer to the form of account that reflects the sum value of money remaining in the company after it has paid off money to its shareholders or has paid any payment to its investors.

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