Question

The stockholders' equity section of Wildhorse Co. balance sheet at December 31 is presented here:

WILDHORSE CO. Balance Sheet (partial)
Stockholders' equity
Paid-in capital
Preferred stock, cumulative, 11,000 shares authorized,
6,000 shares issued and outstanding					$600,000
Common stock, no par, 750,000 shares authorized,
600,000 shares issued					6,000,000
Total paid-in capital					6,600,000
Retained earnings					1,450,000
Total paid-in capital and retained earnings					8,050,000
Less: Treasury stock (5,000 common shares)					41,000
Total stockholders' equity					$8,009,000

From a review of the stockholders' equity section, answer the following questions.

How many shares of common stock are outstanding?

Outstanding shares

enter a number of shares shares

  

  

Assuming there is a stated value, what is the stated value of the common stock?

Stated value of common stock

$enter a dollar amount per share

per share

  

  

What is the par value of the preferred stock?

Par value of preferred stock

$enter a dollar amount per share

per share

  

  

If the annual dividend on preferred stock is $31,000, what is the dividend rate on preferred stock? (Round answer to 2 decimal places, e.g. 52.75.)

Dividend rate on preferred stock

enter dividend rate on preferred stock in persentages %

  

  

If dividends of $64,000 were in arrears on preferred stock, what would be the balance reported for retained earnings?

Balance for Retained Earnings

$enter a dollar amount

Answer 1

Solution:

a)Calculation of number of shares of common stock outstanding

Opening no. of shares outsatanding=600,000 shares

Less:Bought back(Treasury Stock)=5000 shares

No. of shares oustanding 595,000 shares

Treasury stock refers to previously oustanding stock that is bought back.

b)Calculation of stated value of Common stock

Stated Value=$6,000,000/600000 shares

=$10 per share

c)Calculation of Par value of  Preferred stock

Par Value=Amount /No. of shares

=$600,000/ 6,000 shares

=$100 per share

d)Calculation of dividend rate on preferred stock

Dividend Per share=$31,000/60000 shares

=$5.17

Dividend Rate=(Dividend Per share/Par value per share)*100

=($5.17/$100)*100

=5.17%