Permabilt Corp: Stock-issues and dividends. Horizontal model to analyze transactions
Not what you're looking for?
5.
Common and preferred stock-issuances and dividends. Permabilt Corp. was incorporated
on January 1, 2003, and issued the following stock, for cash:
1,200,000 shares of no-par common stock were authorized; 350,000 shares were
issued on January 1, 2003, at $23 per share.
400,000 shares of $100 par value, 10.5% cumulative, preferred stock were
authorized, and 140,000 shares were issued on January 1, 2003, at $132 per
share.
Net income for the years ended December 31, 2003, 2004, and 2005, was
$5,250,000, $7,450,000, and $8,700,000, respectively.
No dividends were declared or paid during 2003 or 2004. However, on
December 17, 2005, the board of directors of Permabilt Corp. declared dividends
of $6,200,000, payable on February 9, 2006, to holders of record as of January 4,
2006.
Required:
a. Use the horizontal model (or write the entry) to show the effects of:
1. The issuance of common stock and preferred stock on January 1, 2003.
2. The declaration of dividends on December 17, 2005.
3. The payment of dividends on February 9, 2006.
b. Of the total amount of dividends declared during 2005, how much will be
received by preferred shareholders?
Purchase this Solution
Solution Summary
The solution provides explanations for the questions and also uses the journal entry format to demonstrate transaction for dividends.
Solution Preview
For part a, please check the excel file included here. (Note that I use the journal entry method to do this)
For part b) as followed:
b. Of the total amount of dividends declared during 2005, how much will be received by preferred shareholders?
Preferred shares also pay dividends which are set in some formula at issue. ...
Purchase this Solution
Free BrainMass Quizzes
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.