ACT 2200 Lecture Notes - Lecture 10: Dividend, Preferred Stock, Retained Earnings
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Helifex , Inc. began operations in 2010 and has the following Capital Stock: | |||||
Helifex , Inc. Capital Stock: | |||||
Preferred Stock: | # Shares | Stated Dividend Rate | Par value | ||
Authorized shares of cumulative, non-participatory preferred stock | 80,000 | 6% | $10 | ||
Issued shares of prefered stock | 60,000 | ||||
Outstanding shares of preferred stock | 30,000 | ||||
Common Stock: | # Shares | ||||
Authorized shares of $1 par value common stock | 50,000 | ||||
Issued shares of common stock | 40,000 | ||||
Outstanding shares of common stock | 10,000 | ||||
Required: | |||||
a) | Compute the amount of Preferred Stock dividends. | ||||
b) | On January 1, 2017, the Board of Directors declared dividends of | $ 35,000 | |||
Prepare the journal entry for the declaration of the dividends. | |||||
c) | On March 31, 2017, the dividends are disbursed to stockholders of record. Determine the allocation of dividends to Preferred and Common Stockholders. | ||||
d) | The Board of directors did not declare dividends during 2018. Determine the allocation of dividends to Preferred and Common Stockholders. | ||||
Total dividends for Preferred Stockholders | |||||
Total dividends for Common Stockholders | |||||
e) | On June 8, 2019 the Board of Directors declared dividends of | $110,000 | |||
Determine the allocation of dividends to Preferred and Common Stockholders. | |||||
f) | The following year, on November 30, 2020, the board declared dividends of | $100,000 | |||
Determine the allocation of dividends to Preferred and Common stockholders. | |||||
g) | Explain the advantages and disadvantages of investing in preferred stock. |
Match the items below by selecting the appropriate number in thespace provided.
Net income retained in the corporation. | |
The amount that must be retained in the business for theprotection of creditors. | |
Preferred stockholders have a right to receive current andunpaid prior-year dividends before common stockholders receive anydividends. | |
Creditors only have corporate assets to satisfy theirclaims. | |
Responsible to stockholders for corporate activity. | |
The amount assigned to each share of stock in the corporatecharter. | |
Unit of ownership in a corporation. | |
Enables stockholders to maintain their same percentageownership when new shares are issued. | |
Corporation's own stock that has been reacquired by thecorporation but not retired. | |
Total amount paid-in on capital stock. |
1. | Limited liability |
2. | Capital stock |
3. | Board of directors |
4. | Paid-in capital |
5. | Retained earnings |
6. | Preemptive right |
7. | Par value |
8. | Legal capital |
9. | Treasury stock |
10. | Cumulative feature |
The Capital Corporation had stockholders equity on January 1,2000 as follows:
Common Stock, $5 par value, 1,000,000 shares authorized, 525,000shares issued and outstanding | $2,625,000 |
Paid-in Capital/Contributed Capital in excess of par value | $1,025,000 |
Retained Earnings | $2,850.000 |
Please prepare journal entries for the followingtransactions.
(1)
May 1
A cash dividend of $1.10 per share was declared by the Board ofDirectors to stockholders of record on May 20th, payableon June 1st.
(2)
June 1
Paid the cash dividend.
(3)
July 1
Board of Directors declared a 10% stock dividend with a market valeof $23 per share to the stockholders of record on July15th, distributed on August 1st.