Use the data in Exercise 11-8 to determine the number of dividends paid each year to each of the two classes of stockholders assuming that the preferred stock is cumulative. Also, determine the total dividends paid to each class for the four years combined.
The Commonsection of Cyril Corporation’s balance sheet shows the following:
Preferred stock—6% cumulative, \(25 par value,
10,000 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . \) 250,000
Common stock—\(8 par value, 100,000 shares
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 535,000
Total stockholders’ Common. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)1,585,000
This year’s dividends on preferred stock have been paid. Determine the book value per share of common stock under two separate situations.
1. No preferred dividends are in arrears.
2. Three years of preferred dividends are in arrears.
On June 30, 2017, Sharper Corporation’s common stock is priced at \(62 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows.
Common stock—\)10 par value, 120,000 shares
authorized, 50,000 shares issued and outstanding . . . . . . . . . . . . . \( 500,000
Paid-in capital in excess of par value, common stock . . . . . . . . . . . . . . 200,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660,000
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)1,360,000
1. Assume that the company declares and immediately distributes a 50% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares.
a. What is the retained earnings balance?
b. What is the amount of total stockholders’ equity?
c. How many shares are outstanding?
2. Assume that the company implements a 3-for-2 stock split instead of the stock dividend in part 1.
Answer these questions about stockholders’ equity as it exists after issuing the new shares.
a. What is the retained earnings balance?
b. What is the amount of total stockholders’ equity?
c. How many shares are outstanding?
3. Explain the difference, if any, to a stockholder from receiving new shares distributed under a large stock dividend versus a stock split.
![Q11DQ What is the difference between a... [FREE SOLUTION] (2024)](data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAAEAAAABCAQAAAC1HAwCAAAAC0lEQVR42mP8/h8AAvMB+NzmkbcAAAAASUVORK5CYII=)