Question

At January 1, AAA Corporation had the following shareholders' equity: Share capital $1 Preferred shares, noncumulative...

At January 1, AAA Corporation had the following shareholders' equity:

Share capital

$1 Preferred shares, noncumulative
25,000 shares authorized, 8,000 shares issued $160,000
Common Shares, 1,000,000 shares authorized
50,000 shares issued 750,000
910,000
Retained Earnings 425,000

Total Shareholders' Equity $1,335,000

On March 12, when the preferred shares have a market value of $19, the bond of directors declared and paid a 10% preferred stock dividend. On July 31, the board declared a 2-for-1 stock split on the common shares. During the year, the company paid cash dividends of $85,000 and reported profit of $465,000. At its December 31 year end, the balance in share capital is?

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Answer #1

Balance at 31st december

1) 2000000 shares authorised

100000 shares issued $750000

2) preference share capital

25000 authorised, 8000 issued $160000

balance in share capital on 31/12 $910000 (1+2)

3) Retained earnings $425000

less : Dividend $16000

Add; profit reported $465000

Total retain earnings $874000

Total share holder equity (1+2+3) $1784000

Notes: since shares ae splited it refers to change n number of shares and amount per share only and not in the total value of shares

before split 50000 shares of 750000 @15each

after split 2:1 100000 shares [email protected]

it is assumed reported profit is after paying cash dividend.

share capital includes equity and preference share capital

share holders equity includes share capital + retained earnings

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