Gammon's state charter authorized it to issue 2 million shares of $1 par value common stock and 50,000 shares of 4 percent, $20 par value cumulative and convertible preferred stock. Gammon engaged in a number of transactions involving stock and dividends during 2020. These transactions were as follows: 1/02 Issued 200,000 shares of common stock for $250,000. Issued 6,000 shares of common stock for accounting and legal services. The bills for these services totaled $7,200. Issued 240,000 shares of common stock to Tom Lee in exchange for a building and land appraised at $200,000 and $50,000, respectively. Purchased 40,000 shares of common stock for the treasury at $1.25 per share from a person who changed her mind about investing in the company. Issued 50,000 shares of preferred stock for $1,000,000. Sold 20,000 of the shares in the treasury for $1.50 per share. Fisher's board of directors declared dividends of $49,820 payable on January 15, 2021, to stockholders of record on January 7. Dividends included preferred stock dividends of $20,000 for one-half year. For the period ended December 31, 2020, Gammon reported net income of $80,000 and earnings per common share of $0.14. At December 31, the market price per common share was $1.60. Required 1. Record Gammon's stock transactions in T accounts. 2. Prepare the stockholders' equity section of Gammon's balance sheet as of December 31, 2020. 3. Calculate Gammon's dividends yield on common stock, price/earnings ratio of common stock, and return on equity.
Gammon's state charter authorized it to issue 2 million shares of $1 par value common stock and 50,000 shares of 4 percent, $20 par value cumulative and convertible preferred stock. Gammon engaged in a number of transactions involving stock and dividends during 2020. These transactions were as follows: 1/02 Issued 200,000 shares of common stock for $250,000. Issued 6,000 shares of common stock for accounting and legal services. The bills for these services totaled $7,200. Issued 240,000 shares of common stock to Tom Lee in exchange for a building and land appraised at $200,000 and $50,000, respectively. Purchased 40,000 shares of common stock for the treasury at $1.25 per share from a person who changed her mind about investing in the company. Issued 50,000 shares of preferred stock for $1,000,000. Sold 20,000 of the shares in the treasury for $1.50 per share. Fisher's board of directors declared dividends of $49,820 payable on January 15, 2021, to stockholders of record on January 7. Dividends included preferred stock dividends of $20,000 for one-half year. For the period ended December 31, 2020, Gammon reported net income of $80,000 and earnings per common share of $0.14. At December 31, the market price per common share was $1.60. Required 1. Record Gammon's stock transactions in T accounts. 2. Prepare the stockholders' equity section of Gammon's balance sheet as of December 31, 2020. 3. Calculate Gammon's dividends yield on common stock, price/earnings ratio of common stock, and return on equity.
Chapter1: Financial Statements And Business Decisions
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Gammon's state charter authorized it to issue 2 million shares of
$1 par
value common stock and 50,000 shares of 4 percent, $20
par value cumulative and convertible preferred stock. Gammon
engaged in a number of transactions involving stock and
dividends during 2020. These transactions were as follows:
1/02 Issued 200,000 shares of common stock for $250,000.
Issued 6,000 shares of common stock for accounting and legal
services. The bills for these services totaled $7,200.
Issued 240,000 shares of common stock to Tom Lee in exchange
for a building and land appraised at $200,000 and $50,000,
respectively.
Purchased 40,000 shares of common stock for the treasury at
$1.25 per share from a person who changed her mind about
investing in the company.
Issued 50,000 shares of preferred stock for $1,000,000.
Sold 20,000 of the shares in the treasury for $1.50 per share.
Fisher's board of directors declared dividends of $49,820
payable on January 15, 2021, to stockholders of record on
January 7. Dividends included preferred stock dividends of
$20,000 for one-half year.
For the period ended December 31, 2020, Gammon reported net
income of $80,000 and earnings per common share of $0.14. At
December 31, the market price per common share was $1.60.
Required
1. Record Gammon's stock transactions in T accounts.
2. Prepare the stockholders' equity section of Gammon's
balance sheet as of December 31, 2020.
3. Calculate Gammon’s dividends yield on common stock,
price/earnings ratio of common stock, and return on equity.
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