Question

The equity sections for Atticus Group at the beginning of the year (January 1) and end...

The equity sections for Atticus Group at the beginning of the year (January 1) and end of the year (December 31) follow.

Stockholders’ Equity (January 1)
Common stock—$5 par value, 100,000 shares
authorized, 35,000 shares issued and outstanding		 $ 175,000
Paid-in capital in excess of par value, common stock 135,000
Retained earnings 340,000
Total stockholders’ equity $ 650,000
Stockholders’ Equity (December 31)
Common stock—$5 par value, 100,000 shares
authorized, 41,200 shares issued, 4,000 shares in treasury		 $ 206,000
Paid-in capital in excess of par value, common stock 178,400
Retained earnings ($40,000 restricted by treasury stock) 440,000
824,400
Less cost of treasury stock (40,000 )
Total stockholders’ equity $ 784,400


The following transactions and events affected its equity during the year.

Jan. 5 Declared a $0.40 per share cash dividend, date of record January 10.
Mar. 20 Purchased treasury stock for cash.
Apr. 5 Declared a $0.40 per share cash dividend, date of record April 10.
July 5 Declared a $0.40 per share cash dividend, date of record July 10.
July 31 Declared a 20% stock dividend when the stock’s market value was $12 per share.
Aug. 14 Issued the stock dividend that was declared on July 31.
Oct. 5 Declared a $0.40 per share cash dividend, date of record October 10.

Required:
1. How many common shares are outstanding on each cash dividend date?

2. What is the total dollar amount for each of the four cash dividends?

3. What is the amount of retained earnings transferred to paid-in capital accounts (capitalized) for the stock dividend?

4. What is the per share cost of the treasury stock purchased? (Round your answer to 2 decimal places.)

5. How much net income did the company earn this year?

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Homework Answers

Answer #1

.

Jan. 5 Apr. 5 July 5 Oct. 5
Outstanding common shares 35000 31000 31000 37200
(35000 - 4000) (1.2 x 31000)

Part 2

2.

Jan. 5 Apr. 5 July 5 Oct. 5
Cash dividend amounts 14000 12400 12400 14880
(35000 x $0.40) (31000 x $0.40) (31000 x $0.40) (37200 x $0.40)

Part 3

Capitalization amount = 20% x 31000 x $12 = $74400

Part 4

Cost per share = $40000/4000 = $10 per share

Part 5

Retained earnings (beg) + Net income - Cash dividends - Stock divided = Retained earnings (end)

340000+net income - (14000+12400+12400+14880)-74400=440000

340000+net income - 53680-74400 =440000

Net income = 440000+53680+74400-340000 = $228080

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