McMinn Publications was organized early in 2010 with authorization to issue 20,000 shares of $100 par value preferred stock and 1 million shares of $1 par value common stock. All of the preferred stock was issued at par, and 300,000 shares of common stock were sold for $20 per share. The preferred stock pays a 10 percent cumulative dividend. During the first five years of operations (2010 through 2014) the corporation earned a total of $4,560,000 and paid dividends of $1 per share each year on the common stock. In 2015, however, the corporation reported a net loss of $1,825,000 and paid no dividends. a. Prepare the stockholders' equity section of the balance sheet at December 31, 2015. Include a supporting schedule showing your computation of retained earnings at the balance sheet date. (Hint: Income increases retained earnings, whereas dividends and net losses decrease retained earnings.) b. Do the dividends in arrears appear as a liability of the corporation as of the end of 2015? Explain
McMinn Publications was organized early in 2010 with authorization to issue 20,000 shares of $100 par value preferred stock and 1 million shares of $1 par value common stock. All of the preferred stock was issued at par, and 300,000 shares of common stock were sold for $20 per share. The preferred stock pays a 10 percent cumulative dividend. During the first five years of operations (2010 through 2014) the corporation earned a total of $4,560,000 and paid dividends of $1 per share each year on the common stock. In 2015, however, the corporation reported a net loss of $1,825,000 and paid no dividends. a. Prepare the stockholders' equity section of the balance sheet at December 31, 2015. Include a supporting schedule showing your computation of retained earnings at the balance sheet date. (Hint: Income increases retained earnings, whereas dividends and net losses decrease retained earnings.) b. Do the dividends in arrears appear as a liability of the corporation as of the end of 2015? Explain
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:McMinn Publications was organized early in 2010 with
authorization to issue 20,000 shares of $100 par value
preferred stock and 1 million shares of $1 par value
common stock. All of the preferred stock was issued at
par, and 300,000 shares of common stock were sold for
$20 per share. The preferred stock pays a 10 percent
cumulative dividend. During the first five years of
operations (2010 through 2014) the corporation earned a
total of $4,560,000 and paid dividends of $1 per share
each year on the common stock. In 2015, however, the
corporation reported a net loss of $1,825,000 and paid no
dividends.
a. Prepare the stockholders' equity section of the balance
sheet at December 31, 2015. Include a supporting
schedule showing your computation of retained earnings
at the balance sheet date. (Hint: Income increases
retained earnings, whereas dividends and net losses
decrease retained earnings.)
b. Do the dividends in arrears appear as a liability of the
corporation as of the end of 2015? Explain
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