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    Common stock issue price/preferred dividend

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    E 8.6 Common stock-calculate issue price and dividend amount
    The balance sheet for common stock is the following:

    Common stock without par value, 2,000,000 shares authorized,
    400,000 shares issued, and 360,000 shares outstanding - $2,600,000


    a. Calculate the average price at which the shares were issued.
    b. If these shares had been assigned at stated value of $1 each, show how the caption here would be different.
    c. If a cash dividend of $0.60 per share were declared, calculate the total amount of cash that would be paid to stockholders.
    d. What accounts for the difference between issued shares and outstanding shares?

    E 8.8 Preferred stock-calculate dividend amounts. Calculate the cash dividends required to be paid for each of the following preferred stock issues:


    a. The semiannual dividend on 6% cumulative preferred, $50 par value, 30,000 shares authorized, issued, and outstanding.
    b. The annual dividend on $3.60 cumulative preferred, 400,000 shares authorized, 180,000 shares issued, 148,200 outstanding. Last year's dividend has not been paid.
    c. The quarterly dividend on 7.5% cumulative preferred, $100 stated value, $103 liquidating value, 120,000 shares authorized, 112,000 shares issued and outstanding. No dividends are in arrears.

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    Solution Preview

    1.a. Average Price = Total Amount Received/Total shares issued = 2,600,000/400,000 = $6.50
    b. In this case Common Stock would be shown at stated value and the remaining amount would be shown as paid in capital in excess of stated value. The captions would be
    Common Stock ($1 stated value, ...

    Solution Summary

    The solution explains how to calculate the average issue price of common stock and the cash dividend to be paid on preferred stock.