Problem 11-2A (Part Level Submission) The stockholders\' equity accounts of Culv
ID: 2581467 • Letter: P
Question
Problem 11-2A (Part Level Submission) The stockholders' equity accounts of Culver Corporation on January 1, 2017, were as follows. Preferred Stock (696, $100 par noncumulative, 4,850 shares authorized) Common Stock ($3 stated value, 316,000 shares authorized) Paid-in Capital in Excess of Par Value-Preferred Stock Paid-in Capital in Excess of Stated Value-Common Stock Retained Earnings Treasury Stock (4,850 common shares) $291,000 790,000 14,550 505,600 694,500 38,800 During 2017, the corporation had the following transactions and events pertaining to its stockholders' equity. Feb. 1 Issued 4,700 shares of common stock for $32,900. Mar. 20 Purchased 1,650 additional shares of common treasury stock at $9 per share. Oct. 1 Declared a 6% cash dividend on preferred stock, payable November 1 Nov. 1 Paid the dividend declared on October 1. Dec. 1 Declared a $0.85 per share cash dividend to common stockholders of record on December 15, payable December 31, 2017 Dec. 31 Determined that net income for the year was $276,400. Paid the dividend declared on December 1Explanation / Answer
Statement of Stockholders' Equity Preferred Stock Common Stock Paid-in-Capital in excess of Par - Preferred Paid-in-Capital in excess of Par - Common Retained Earnings Treasury Stock Total Beginning Balance - Jan 1, 2017 291,000 790,000 14,550 505,600 694,500 (38,800) 2,256,850 Issue of Shares - 4700 Shares 14,100 - 18,800 - 32,900 Purchased Treasury Stock - 1650 Shares - - - - - (14,850) (14,850) Dividend Declared - Preferrence - - - - (17,460) (17,460) Cash Dividend - Common - - - - (267,070) (267,070) Net Income - 2017 - - - 276,400 - 276,400 Ending Balance - Dec 31, 2017 291,000 804,100 14,550 524,400 686,370 (53,650) 2,266,770 Payout Ratio = Cash Dividends / Net Income Payout Ratio = $267,070 / $276,400 Payout Ratio = 96.62% Earning Per Share = (Net Income - Preference Dividend) / Avg. o/s Shares Avg. O/s Shares = (311,150 + 314,200) /2 = 312,675 shares Earning Per Share = ($276,400 - 17,460) / 312,675 shares Earning Per Share = $0.83 per share (Approx.) Return on Common Stockholders' Equity = (Net Income - Preference Dividend) / Avg. Common Stockholders' Equity Opening Bal. - Common Stockholders Equity = $790,000 + $505,600 + 694,500 - $38,800 = $4,246,950 Ending Bal. - Common Stockholders Equity = $804,100 + $524,400 + 686,370 - $53,650 = $4,281,640 Avg. Common Stockholders' Equity = ($4,246,950 + $4,281,640) / 2 = $4,264,295 Return on Common Stockholders' Equity = ($276,400 - $17,460) / $4,264,295 Return on Common Stockholders' Equity = 6.07% (Approx.)