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Stockholders' Equity Section of the Balance Sheet

ABC Industries reported the following stockholders' equity section of its balance sheet at December 31, 2005.

December 31, 2005 2004
Stockholders' equity
8.5% cumulative preferred stock, $25 par value $ 450,000 $ 375,000
Common stock, $5 par value 680,000 575,000
Paid-in capital in excess of par value, common 4,050,000 2,500,000
Retained earnings 9,400,300 7,300,800
Treasury stock (1,970,050) (1,510,000)
Total stockholders' equity $12,610,250 $9,240,800

The company has paid cash dividends annually for 24 years. There are no dividends in arrears. The date of declaration is always March 1 and the amount of dividends declared is always 25% of prior year net income. Year 2004 net income was $2.0 million. At year-end 2005, the average cost of treasury stock was $31 per share. At year-end 2004, the average price of treasury stock was $25.

Calculate or determine
A. How many preferred shares have been issued as of the end of 2005 and 2004?

B. How many common shares have been issued as of the end of 2005? As of year-end
2004?
C. How many treasury shares are there at year-end 2005 and at year-end 2004?

D. How many common shares are outstanding at year-end 2005 and at year-end
2004?
E. As of year-end 2005, what was the average price (at original issuance) of common
stock?
F. What was the average selling price of the common shares issued during 2005?

G. What was net income for 2005?

H. What was the amount of the dividend per share paid to preferred stock during
2005?
I. What was the amount of the dividend per share paid to common stock during 2005?
(Assume there were 40,750 common shares outstanding at the date of the 2005
dividend distribution.)

J. What is the dividend per share that is scheduled to be paid to common stock in
2006? (Assume there will be no change in the number of shares outstanding
between December 31, 2005 and the distribution of dividends in 2006.)

Solution Preview

A. How many preferred shares have been issued as of the end of 2005 and 2004?

The par value of preferred share is $25 and there is no paid in capital in excess of par value, preferred so all preferred stock would have been issued at $25.
Number of preferred share X 25 = total value of preferred stock
In 2004, the total value is 375,000 so the total shares issued are 375,000/25=15,000 at end 2004
At end 2005 the number of preferred shares issued = 450,000/25=18,000

B. How many common shares have been issued as of the end of 2005? As of year-end
2004?

In the same way, the par value of common shares is $5. The amount in the common stock will be number of shares X $5. The number of shares will be Amount/5
As of 2004 the number of shares are 575,000/5=115,000
As of 2005 the number of ...

Solution Summary

The solution explains various calculations relating to Stockholders' Equity Section of the Balance Sheet.

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