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Kramer Industries, Anaconda International, Nicklaus Corp.

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18-6
(Split into two pictures)
P 18-6 Statement of shareholders' equity

Comparative statements of shareholders' equity for Anaconda International Corporation were reported as follows for the fiscal years ending December 31, 2009, 2010, and 2011

ANACONDA INTERNATIONAL CORPORATION
Statements of Shareholders' Equity
For the Years Ended Dec. 31, 2009, 2010, and 2011
($ in millions)

18-9
P 18-9 Effect of preferred stock characteristics on dividends

The shareholders' equity of Kramer Industries includes the data shown below. During 2009, cash dividends of $150 million were declared. Dividends were not declared in 2007 or 2008.

($ in millions)
Common stock $200
Paid-in capital - excess of par, common 800
Preferred stock, 10%, nonparticipating 100
Paid-in capital - excess of par, preferred 270

Required:

Determine the amount of dividends payable to preferred shareholders and to common shareholders under each of the following two assumptions regarding the characteristics of the preferred stock.

18-12
(split into two pictures)
P 18-12 Various shareholders' equity topics; comprehensive

Part A
In late 2008, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 5,000,000 shares of common stock carrying a $1 par value, and 1,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On January 2, 2009, 3,000,000 shares of the common stock are issued in exchange for cash at an average price of $10 per share. Also on January 2, all 1,000,000 shares of preferred stock are issued at $20 per shares.

Required:
1. Prepare journal entries to record these transactions.

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P 18-9 Effect of preferred stock characteristics on dividends

The shareholders' equity of Kramer Industries includes the data shown below. During 2009, cash dividends of $150 million were declared. Dividends were not declared in 2007 or 2008.

($ in millions)
Common stock $200
Paid-in capital - excess of par, common 800
Preferred stock, 10%, nonparticipating 100
Paid-in capital - excess of par, preferred 270

Required:

Determine the amount of dividends payable to preferred shareholders and to common shareholders under each of the following two assumptions regarding the characteristics of the preferred stock.

Assumption A - The preferred stock is noncumulative.

Dividends for Preferred stock = 10% x $100 = $10 million

Therefore, the remaining amount left that go to Common stock will be

$150 million - $10 million = $140 million

Assumption B - The preferred stock is cumulative.

If the preferred stock is cumulative, it means that if all or part of the required dividend on preferred stock is not paid during a given year, the unpaid dividend accumulates and carries forward to succeeding years. The accumulated amount of unpaid dividends as well as current dividends must be paid before any dividends can be paid on common stock.

Dividends for Preferred stock = $10 million x 3 years (2007, 2008, 2009) = $30 million

Dividends for Common stock = $150 million - $30 million = $120 million

P 18-6 Statement of shareholders' equity

Comparative statements of shareholders' equity for Anaconda International Corporation were reported as follows for the fiscal years ending December 31, 2009, 2010, and 2011

ANACONDA INTERNATIONAL CORPORATION
Statements of Shareholders' Equity
For the Years Ended Dec. 31, 2009, 2010, and 2011
($ in millions)

Preferred Common Additional Total
Stock Stock Paid-in Retained Shareholders'
$10 par $1 par Capital Earnings Equity

Balance at January 1, 2009 55 495 1,878 2,428
Sale of preferred shares 10 470 480
Sale of common shares 7 63 70
Cash dividend, preferred (1) (1)
Cash dividend, common (16) (16)
Net income 290 290
Balance at December 31, 2009 10 62 1,028 2,151 3,251
Retirement of shares (3) (27) (20) (50)
Cash dividend, preferred (1) (1)
Cash dividend, common (20) (20)
3-for-2 split effected in
The form of a dividend 5 (5)
Net income 380 380
Balance at December 31, 2011 15 65 1,055 2,814 3,949

Required:
1. Infer from the statements the events and transactions that affected Anaconda International Corporation's shareholders' equity during 2009, 2010, and 2011. Prepare the journal entries that reflect those ...

Solution Summary

This solution is comprised of a detailed explanation to determine the amount of dividends payable to preferred shareholders and to common shareholders under each of the following two assumptions regarding the characteristics of the preferred stock.

$2.19