
1.
To compute: Number of common shares outstanding on each cash dividend date.
1.

Explanation of Solution
Outstanding shares
Formula for number of outstanding shares:
Jan. 5
Given,
Issued shares are 40,000.
Treasury Shares are 0.
Substitute 40,000 for issue shares and 0 for treasury shares in the above formula,
Hence, number of shares outstanding is 40,000.
Apr. 5
Given,
Issued shares are 40,000.
Treasury Shares are 3,000.
Substitute 40,000 for issue shares and 3,000 for treasury shares in the above formula,
Hence, number of shares outstanding is 37,000.
July 5
Given,
Issued shares are 40,000.
Treasury Shares are 3,000.
Substitute 40,000 for issue shares and 3,000 for treasury shares in the above formula,
Hence, number of shares outstanding is 37,000.
Oct. 5
Given,
Issued shares are 47,400.
Treasury Shares are 3,000.
Substitute 47,400 for issue shares and 3,000 for treasury shares in the above formula,
Hence, number of shares outstanding is 44,400.
2.
To compute: Value of each cash dividend.
2.

Explanation of Solution
Cash dividend
Formula to calculate cash dividend:
Jan. 5
Given,
Number of outstanding shares is 40,000.
Cash dividend per share is $0.50
Substitute 40,000 for number of outstanding shares and $0.50 for cash dividend per share in the above formula,
Hence, total amount of cash dividend is $20,000.
Apr. 5
Given,
Number of outstanding shares is 37,000.
Cash dividend per share is $0.50
Substitute 37,000 for number of outstanding shares and $0.50 for cash dividend per share in the above formula,
Hence, total amount of cash dividend is $18,500.
July 5
Given,
Number of outstanding shares is 37,000.
Cash dividend per share is $0.50
Substitute 37,000 for number of outstanding shares and $0.50 for cash dividend per share in the above formula,
Hence, total amount of cash dividend is $18,500.
Oct. 5
Given,
Number of outstanding shares is 44,400.
Cash dividend per share is $0.50
Substitute 44,400 for number of outstanding shares and $0.50 for cash dividend per share in the above formula,
Hence, total amount of cash dividend is $22,200.
3.
To explain: Amount of capitalization of
3.

Explanation of Solution
Amount of capitalization of retained earnings for stock dividend refer to that amount which is used from retained earnings account to issue common stock account and that amount is $88,800.
Working notes:
Calculation for amount capitalized:
Hence, total amount capitalized is $88,800.
4.
To compute: Per share cost of the
4.

Explanation of Solution
Formula for per share cost of the treasury stock:
Given,
Cost of treasury stock is $30,000.
Number of shares in treasury stock is 3,000.
Substitute $30,000 for cost of treasury stock and 3,000 for number of shares in treasury stock in the above formula,
Hence, per share cost of treasury stock is $10.
5.
To compute: Net income earned by the company during the year 2017.
5.

Explanation of Solution
Formula for net income during the year:
Substitute $400,000 for closing balance of retained earnings, $320,000 for opening balance of retained earnings and $168,000 for dividend paid during the year in the above formula,
Hence, the net income is $248,000.
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Chapter 11 Solutions
FIN & MANAGERIAL ACCT VOL 2 W/CONNECT
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