Share
Explore BrainMass

Dividend Allocation

Financial Statement Analysis

Required: Using the indicated letters, identify the specific effects (including account names and dollar amounts) of the following transactions or conditions on the various financial statement components:

I = Increase D = Decrease NE = No effect

Transaction
Assets
Liabilities
Equity

As part of Makepeace Properties incorporation agreement, a consultant was retained at an agreed-upon fee of $80,000 to provide a marketing plan for the first year of business. The plan benefited the first year only. The consultant felt that Makepeace had an excellent opportunity for success. So the consultant waived the normal $80,000 consulting fee in exchange for 1,000 shares of Makepeace's $1 par value common stock.
Honest Vegetable Co. acquired a tract of undeveloped land in exchange for 9,000 shares of $1 par value common stock. The land's market value was not easily determinable, but the common stock sold on the New York Stock Exchange for $21 per share on the date of the transaction.

Dividend Allocation

Background: The following is the owners' equity section of Simpson Co. at 1/1/2012:

Common Stock ($1 par value; 20,000,000 shares authorized; 4,000,000 shares issued and outstanding) $4,000,000
7% Preferred stock ($30 par value; 1,000,000 shares authorized; 400,000 shares issued and outstanding) 12,000,000
Additional paid-in capital on common stock 17,000,000
Retained earnings 35,000,000
Total Stockholders' Equity $68,000,000

Simpson declares dividends on common and preferred stock annually. On 12/23/12, Simpson declares the annual dividend of $1,500,000 to shareholders of record on 12/31/2010, to be paid 1/5/13.

Required: Determine the total amount of the dividend that is allocated to common and preferred shareholders. You must show your work.

Common _____________________

Preferred _____________________

Solution Summary

Background: The following is the owners' equity section of Simpson Co. at 1/1/2012:

$2.19