Chapter 11: Q15DQ (page 515)
How are EPS results computed for a corporation with a simple capital structure?
Earnings per share is calculated by dividing the difference of net income and preferred dividends by weighted average common shares outstanding
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York’s outstanding stock consists of 80,000 shares of noncumulative 7.5% preferred stock with a \(5 par value and also 200,000 shares of common stock with a \)1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends:
2015 total cash dividends . . . . . . . . . . . . . . $ 20,000
2016 total cash dividends . . . . . . . . . . . . . . 28,000
2017 total cash dividends . . . . . . . . . . . . . . 200,000
2018 total cash dividends . . . . . . . . . . . . . . 350,000
Determine the amount of dividends paid each year to each of the two classes of stockholders: preferred and common. Also compute the total dividends paid to each class for the four years combined
Ecker Company reports \(2,700,000 of net income for 2017 and declares \)388,020 of cash dividends on its preferred stock for 2017. At the end of 2017, the company had 678,000 weighted-average shares of common stock.
In the blank next to each corporate characteristic 1 through 8, enter the letter of the description that best relates to it.
1. Owner authority and control | a. Requires government approval |
2. Ease of formation | b. Corporate income is taxed |
3. Transferability of ownership | c. Separate legal entity |
4. Ability to raise large capital amounts | d. Readily transferred |
5. Duration of life | e. One vote per share |
6. Owner liability | f. High ability |
7. Legal status | g. Unlimited |
8. Tax status of income | h. Limited |
Air France-KLM reported the following equity information in a recent year (euros in millions). Prepare its journal entry, using its account titles, to record the issuance of capital stock assuming that its entire par value stock was issued on March 31 for cash.
March 31 | |
Issued capital | € 300 |
Additional paid-in capital | 2,971 |
Question:
At September 30, the end of Beijing Company’s third quarter, the following stockholders’ equity accounts are reported.
Common stock, \(12 par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)360,000
Paid-in capital in excess of par value, common stock . . . . . . . . . . . . . . . 90,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,000
In the fourth quarter, the following entries related to its equity are recorded
Account and explanation | Debit | Credit | |
Oct.2 | Retained Earnings Common Dividend Payable | 60,000 | 60,000 |
Oct.25 | Common Dividend Payable Cash | 60,000 | 60,000 |
Oct.31 | Retained Earnings Common Stock Dividend Distributable Paid-In Capital in Excess of Par Value, Common Stock. | 75,000 | 36,000 39,000 |
Nov.5 | Common Stock Dividend Distributable Common Stock, \(10 Par Value. | 36,000 | 36,000 |
Dec.1 | Memo—Change the title of the Common Stock account to reflect the new par value of \)4 | ||
Dec.31 | Income Summary Retained Earnings | 210,000 | 210,000 |
Required
1. Explain the transaction(s) underlying each journal entry.
2. Complete the following table showing the equity account balances at each indicated date (take into account the beginning balances from September 30).
Sep .30 | Oct.2 | Oct.25 | Oct.31 | Nov.5 | Dec.1 | Dec.31 | |
Common stock | \( 360,000 | ||||||
Common stock dividend distributable | 0 | ||||||
Paid-in capital in excess of par, common stock | 90,000 | ||||||
Retained earnings | 320,000 | ||||||
Total equity | \)770,000 |
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