Question

Problem 8-31 Comprehensive problem-calculate missing amounts, dividends, total shares, and per share information LO 1, 2, 3, 6, 7

Francis, Inc., has the following stockholders' equity section in its November 30, 2016, balance sheet:

Paid-in capital:
12% preferred stock, $60 par value, 1,000 shares authorized, issued, and outstanding	$	?
Common stock, $8 par value, 50,000 shares authorized, ? shares issued, ? shares outstanding		120,000
Additional paid-in capital on common stock		270,000
Additional paid-in capital from treasury stock		6,500
Retained earnings		48,500
Less: Treasury stock, at cost (1,000 shares of common)		(9,000	)
Total stockholders' equity	$	?

a. Calculate the amount of the total annual dividend requirement on preferred stock.

b. Calculate the amount that should be shown on the balance sheet for preferred stock.

c. Calculate the number of shares of common stock that are issued and the number of shares of common stock that are outstanding.

d. On January 1, 2016, the firm’s balance sheet showed common stock of $105,000 and additional paid-in capital on common stock of $234,375. The only transaction affecting these accounts during 2016 was the sale of common stock. Calculate the number of shares that were sold and the selling price per share.

. Choose the transaction that resulted in the additional paid-in capital from treasury stock.

	Treasury stock was resold at a price greater than its cost.
	Treasury stock was purchased at a price greater than its cost.
	Treasury stock was resold at a price lesser than its cost.

f. The retained earnings balance on January 1, 2016, was $45,150. Net income for the past 11 months was $12,000. Preferred stock dividends for all of 2016 have been declared and paid. Calculate the amount of dividends on common stock during the first 11 months of 2016.

Answer 1

(a) preference stock= 12% of 60 par value.

It means for each stock 12%*60 = 7.2 is paid as dividend

since there are total 1000 outstanding the dividend paid is 1000*7.2 = 7200

(b) The amount that should be shown on the balance sheet for preferred stock is

amount = 60*1000 = 60,000.

(c) The common stock that are issued =120000/par value = 120,000/8 = 15000 issued and they are outstanding

(d) On Jan 1st it is 105000/8=13125 shares outstanding and now it is 15000

so new shares issued are 15000-13125=1875

Selling price per share at that time = (105000+234375)/13125 = 25.86

Now the selling price = 8+((270000-234375)/1875) = 27

(e)The transaction may be they have bought the treasury shares at some cost and when they sold

back at higher cost than they purchased will result this transaction in the balance sheet.