Question

The stockholders’ equity section of Pina Colada Corp. at December 31 is as follows. Pina Colada...

The stockholders’ equity section of Pina Colada Corp. at December 31 is as follows.

Pina Colada Corp.
Balance Sheet(Partial)

Paid-in capital
   Preferred stock, cumulative, 10,000 shares authorized, 7,000 shares issued and outstanding

$420,000

   Common stock, no par, 700,000 shares authorized, 570,000 shares issued

1,140,000

     Total paid-in capital

1,560,000

Retained earnings

1,858,000

        Total paid-in capital and retained earnings

3,418,000

Less: Treasury stock (12,000 common shares)

62,400

             Total stockholders’ equity

$3,355,600


From a review of the stockholders’ equity section, as chief accountant, write a memo to the president of the company answering the following questions.

(a) How many shares of common stock are outstanding? shares
(b) Assuming there is a stated value, what is the stated value of the common stock? $ per share
(c) What is the par value of the preferred stock? $ per share
(d) If the annual dividend on preferred stock is $21,000, what is the dividend rate on preferred stock? %
(e) If dividends of $42,000 were in arrears on preferred stock, what would be the balance in Retained Earnings?

Homework Answers

Answer #1
A)
Issued Common Stock 570000
Less: traesury Stock 12000
Total Common Stock Outstanding 558000
B)
Issued Common Stock 570000
Issue Price $1140000
Stated Value 1140000/570000
$2
C)
Preferred stock
Issued 7000
Issue Price $420000
Stated Value 1140000/570000
$60
D)
Annual Dividend $21000
Issue Price 420000
Coupon rate 21000/420000
5.00%
E)
Retained Earnings $1858000
Less: Preferred dividend arrears $42000
Balance in Retained earnings $1816000
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