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Problem 10-4A Analyze the stockholders' equity section (LO10-7) [The following information applies to the questions displayed...

Problem 10-4A Analyze the stockholders' equity section (LO10-7)

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

The stockholders’ equity section of Velcro World is presented here.

VELCRO WORLD
Balance Sheet (partial)
($ and shares in thousands)
Stockholders' equity:
Preferred stock, $1 par value $ 4,100
Common stock, $1 par value 11,000
Additional paid-in capital 233,000
Total paid-in capital 248,100
Retained earnings 269,000
Treasury stock, 11,000 common shares (143,000 )
Total stockholders' equity $ 374,100

Based on the stockholders' equity section of Velcro World, answer the following questions. Remember that all amounts are presented in thousands.

Problem 10-4A Part 1

Required:

1. How many shares of preferred stock have been issued? (Enter you answer in total number of shares, not in thousands.)

Number of shares: ?????

2. How many shares of common stock have been issued? (Enter you answer in total number of shares, not in thousands.)

Number of shares: ????

3. If the common shares were issued at $11 per share, at what average price per share were the preferred shares issued?

Preferred shares issued price: ???? per share.

4. If retained earnings at the beginning of the period was $231 million and $11 million was paid in dividends during the year, what was the net income for the year? (Enter your answer in million (i.e., 5,000,000 should be entered as 5).)

Net income: ???? million.

5. What was the average cost per share of the treasury stock acquired?

Average cost: ??? per share.

Business   Accounting   
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Homework Answers

Answer #1

1. Number of shares of preferred stock issued = $4,100,000/$1 = 4,100,000

2. Number of shares of common stock issued = $11,000,000/$1 = 11,000,000

3. Additional paid-in capital from common shares = 11,000,000 x ($11 - $1) = 11,000,000 x $10 = $110,000,000

Additional paid-in capital from preferred stock = $233,000,000 - $110,000,000 = $123,000,000

Average price per share of preferred stock = [$1 + ($123,000,000/4,100,000) = $1 + $30 = $31

4. Net income for the year = Retained earnings at end – (Retained earnings at beginning – Dividends)

Net income for the year (in million) = $269 – ($231 - $11) = $269 - $220 = $49

5. Average cost per share of treasury stock = $143,000,000/11,000,000 = $13

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