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Analysis of changes in stockholders' equity accounts

Stockholders' Equity (December 31, 2002)
Common Stock - $4 par value, 50,000 shares authorized, 20,000 shares issued and outstanding

$80,000
Contributed capital in excess of par value, common stock
$60,000
Total contributed capital
$140,000
Retained Earnings
$160,000
Total Stockholders' Equity
$300,000

Stockholders' Equity (December 31, 2003)
Common Stock - $4 par value, 50,000 shares authorized,23,700 shares issued,1,500 shares in treasury

$94,800
Contributed capital in excess of par value, common stock
$89,600
Total contributed capital
$184,400
Retained Earnings ($57,200 restricted by Treasury Stock)
$200,000 = 384,400
Less Treasury Stock at Cost
(15,000)
Total Stockholders' Equity
$369,400

The following transactions and events affect its equity accounts during year 2003:

Feb. 15 Declared a $0.50 per share cash dividend, date of record February 20.
Mar. 2 Purchased treasury stock for cash.
May 15 Declared a $0.50 per share cash dividend, date of record May 20.
Aug. 15 Declared a $0.50 per share cash dividend, date of record August 20.
Oct.4 Declared a 20% stock dividend when the stock's market value is $12 per share.
Oct. 20 Issued a stock dividend that was declared on October 4.
Nov. 15 Declared a $0.50 per share cash dividend, date of record November 20.

Required:

1. How many common shares are outstanding on each cash dividend date?
*To find this, do I need to subtract the issued stock by the treasury stock
2. What is the total dollar amount for each of the four cash dividends?
*Honestly, I don't understand.
3. What is the amount of the capitalization of retained earnings for the stock dividend?
*The teacher got an answer of $44,400. I have know idea how and could you explain what it means by capitalization.
4. What is the per share cost of the treasury stock purchased?
*I have know idea how she got answer of $10 per share either.
5. How much net income did the company earn during year 2003?
*Did she get an answer of $124,000 by simply subtracting beginning retained earnings by the end retained earnings and adding the dividends.

Solution Preview

Question 1
In computing for the outstanding stocks for each of the cash and stock dividend dates, subtract the number of common stocks currently in treasury from the number of stocks issued.

Question 2
To compute for this, you have to multiply the number you got in Question 1 by the declared per share cash dividend. For example, for the Feb 15 cash dividend, there are 20,000 outstanding stocks multiplied by $0.50 to get $10,000 total dollar amount of the cash dividend for that period.

Note ...

Solution Summary

The solution provides an analysis of changes in stockholders' equity accounts.

$2.19