Chapter 11: Q7DQ (page 515)
What is the difference between the market value per share and the par value per share.
Market value is the price at which the stock is readily available in the Market.
Par Value is the nominal value of the share which is assigned by the corporation in its charter.
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Unilever Group reports the following equity information for the years ended December 31, 2015 and 2014
(euros in millions).
December 31 | 2015 | 2014 |
Share capital | € 484 | € 484 |
Share premium | 152 | 145 |
Other reserves | (7,816) | (7,538) |
Retained profit | 22,619 | 20,560 |
Shareholders’ equity | € 15,439 | € 13,651 |
1. Match each of the three account titles—Share capital, Share premium, and Retained profit—with the usual account title applied under U.S. GAAP from the following options:
a. Paid-in capital in excess of par value, common stock
b. Retained earnings
c. Common stock, par value
2. Prepare Unilever’s journal entry, using its account titles, to record the issuance of capital stock assuming that its entire par value stock was issued on December 31, 2014, for cash.
3. What were Unilever’s 2015 dividends assuming that only dividends and income impacted retained profit for 2015 and that its 2015 income totaled €5,259?
Stockholders’ equity of Ernst Company consists of 80,000 shares of \(5 par value, 8% cumulative preferred stock and 250,000 shares of \)1 par value common stock. Both classes of stock have been outstanding since the company’s inception. Ernst did not declare any dividends in the prior year, but it now declares and pays a $110,000 cash dividend at the current year-end. Determine the amount distributed to each class of stockholders for this two-year-old company.
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.
Foxburo Company expects to pay a \(2.34 per share cash dividend this year on its common stock. The current market value of Foxburo stock is \)32.50 per share. Compute the expected dividend yield on the Foxburo stock. Would you classify the Foxburo stock as a growth or an income stock? Explain
For each of the following statements regarding dividends, indicate whether it is true or false.
1. Cash and stock dividends reduce retained earnings.
2. Dividends payable is recorded at the time a cash dividend is declared.
3. The date of record refers to the date a cash dividend is paid to stockholders.
4. Stock dividends are a mechanism to keep the market price of stock affordable
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