Dividend allocation between classes

Dividend allocation between classes of shareholders 

Stockholders’ equity of Ernst Company consists of 78,000 shares of $5 par value, 10% cumulative preferred stock and 270,000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company’s inception. Ernst did not declare any dividends in the prior year, but it now declares and pays a $115,000 cash dividend at the current year-end.

Determine the amount distributed to each class of stockholders for this two-year-old company.

Exercise 11-3 Recording stock issuance

Prepare journal entries to record the following four separate issuance of stock.

  1. A corporation issued 10,000 shares of $20 par value common stock for $240,000 cash.
  2. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $41,500. The stock has a $1 per share stated value.
  3. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $41,500. The stock has no stated value.
  4. A corporation issued 2,500 shares of $75 par value preferred stock for $229,000 cash.

Exercise 11-4 Stock issuance for noncash assets 

Sudoku Company issues 32,000 shares of $8 par value common stock in exchange for land and a building. The land is valued at $231,000 and the building at $361,000. Prepare the journal entry to record issuance of the stock in exchange for the land and building.

Use the following information for the Exercises below.

[The following information applies to the questions displayed below.]
York’s outstanding stock consists of 60,000 shares of 7.5% preferred stock with a $5 par value and also 170,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends:

2015 total cash dividends$10,700
2016 total cash dividends$20,500
2017 total cash dividends$290,000
2018 total cash dividends$440,000

Exercise 11-8 Dividends on common and noncumulative preferred stock 

Determine the amount of dividends paid each year to each of the two classes of stockholders: preferred and common. Also compute the total dividends paid to each class for the four years combined.Assume that the preferred stock is noncumulative.

Use the following information for the Exercises below.

[The following information applies to the questions displayed below.]

York’s outstanding stock consists of 60,000 shares of 7.5% preferred stock with a $5 par value and also 170,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends:

2015 total cash dividends$10,700
2016 total cash dividends$20,500
2017 total cash dividends$290,000
2018 total cash dividends$440,000

Exercise 11-9 Dividends on common and cumulative preferred stock 

Determine the amount of dividends paid each year to each of the two classes of stockholders assuming that the preferred stock is cumulative. Also determine the total dividends paid to each class for the four years combined.

Exercise 11-10 Recording and reporting treasury stock transactions 

On October 10, the stockholders’ equity of Sherman Systems appears as follows.

Common stock–$10 par value, 88,000 shares authorized, issued, and outstanding$880,000
Paid-in capital in excess of par value, common stock$296,000
Retained earnings$992,000
Total stockholders’ equity$2,168,000
  1. Prepare journal entries to record the following transactions for Sherman Systems.
  • Purchased 6,600 shares of its own common stock at $41 per share on October 11.
  • Sold 1,400 treasury shares on November 1 for $47 cash per share.
  • Sold all remaining treasury shares on November 25 for $36 cash per share.
  1. Prepare the revised equity section of its balance sheet after the October 11 treasury stock purchase.

Exercise 11-11 Preparing a statement of retained earnings LO C3

The following information is available for Amos Company for the year ended December 31, 2017.

  1. Balance of retained earnings, December 31, 2016, prior to discovery of error, $856,000.
  2. Cash dividends declared and paid during 2017, $14,000.
  3. It neglected to record 2015 depreciation expense of $37,600, which is net of $7,400 in tax benefits.
  4. The company earned $212,000 in 2017 net income.

Prepare a 2017 statement of retained earnings for Amos Company.

Exercise 11-13 Earnings per share

Kelley Company reports $1,750,000 of net income for 2017 and declares $245,000 of cash dividends on its preferred stock for 2017. At the end of 2017, the company had 360,000 weighted-average shares of common stock.

  1. What amount of net income is available to common stockholders for 2017?
  2. What is the company’s basic EPS for 2017?

Exercise 11-14 Price-earnings ratio computation and interpretation 

CompanyEarnings per ShareMarket Value per Share
110160
2876.8
3676.2
439288.6

Compute the price-earnings ratio for each of these four separate companies.

Exercise 11-15 Dividend yield computation and interpretation 

CompanyAnnual Cash Dividend per ShareMarket Value per Share
111164.18
2893.02
39.789.81
41.8120.25

Compute the dividend yield for each of these four separate companies.

Leave a Reply

Your email address will not be published.