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Identifying and Analyzing Stock and Cash Dividends

Identifying and Analyzing Financial Statement Effects of Dividends

The stockholders' equity of Kinney Company at December 31, 2011, is shown below.

5% preferred stock, $100 par value, 18,000 shares authorized; 8,000 shares issued and outstanding $ 800,000
Common stock, $5 par value, 200,000 shares authorized; 50,000 shares issued and outstanding 250,000
Paid-in capital in excess of par value—preferred stock 40,000
Paid-in capital in excess of par value—common stock 300,000
Retained earnings 656,000
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Total stockholders' equity $2,046,000

The following transactions, among others, occurred during 2012:
Apr. 1 Declared and issued a 100% stock dividend on all outstanding shares of common stock. The market value of the stock was $11 per share.
Dec. 7 Declared and issued a 4% stock dividend on all outstanding shares of common stock. The market value of the stock was $14 per share.
Dec. 20 Declared and paid (1) the annual cash dividend on the preferred stock and (2) a cash dividend of 80 cents per common share.
1. What is the contributed capital and earned capital for December 7th. What is the Cash Asset for Dec 20th.
2. Compute retained earnings for 2012 assuming that the company reports 2012 net income of $253,000.

Analyzing Cash Dividends on Preferred and Common Stock
Potter Company has outstanding 15,000 shares of $50 par value, 6% preferred stock and 60,000 shares of $5 par value common stock. During its first three years in business, it declared and paid no cash dividends in the first year, $240,000 in the second year, and $45,000 in the third year.

(a) If the preferred stock is cumulative, determine the total amount of cash dividends paid to each class of stock in each of the three years.

What is the Common Stock for year 2?

(b) If the preferred stock is noncumulative, determine the total amount of cash dividends paid to each class of stock in each of the three years.

What is the Common Stock and Preferred Stock for year 2?

Solution Summary

This solution discusses the analysis of financial statements.

$2.19