Question

The stockholders’ equity section of Bramble Corp.’s balance sheet at December 31 is presented here.


BRAMBLE CORP.
Balance Sheet (partial)
Stockholders’ equity
Paid-in capital
Preferred stock, cumulative, 12,500 shares authorized, 7,500 shares issued and outstanding $ 787,500

Common stock, no par, 735,000 shares authorized, 565,000 shares issued 2,260,000
Total paid-in capital 3,047,500
Retained earnings 1,158,000
Total paid-in capital and retained earnings 4,205,500
Less: Treasury stock (6,900 common shares) 36,800
Total stockholders’ equity $4,168,700

(a) How many shares of common stock are outstanding?
(b) Assuming there is a stated value, what is the stated value of the common stock?
(c) What is the par value of the preferred stock?
(d) If the annual dividend on preferred stock is $47,250, what is the dividend rate on preferred stock?
(e) If dividends of $73,800 were in arrears on preferred stock, what would be the balance reported for retained earnings?

Answer 1

Answer:

Common stock outstanding is 558,100

Stated value of common stock is $4.00  per share

Par value of preferred stock is $105 per share

Dividend rate on preferred stock is 6%

The arrears of $73,800 would not impact the retained earnings,they are to be declared before the impact is felt in retained earnings.

Explanation:

Common stock outstanding =issued common stock -treasury stock

                                              =565,000-6,900

                                              ==558,100

Stated value of common stock=value of shares issued/shares issued

                                                   =$2,260,000/565,000

                                                    =$4.00  per share

Par value of preferred stock=value of shares issued/shares issued

                                              =$787,500/7500

                                              =$105 per share

preferred dividends=Preferred share capital *Dividend rate on preferred stock

preferred dividends is $47,250

preferred share capital is $787,500

dividend rate on preferred stock is unknown

$47,250=$787,500*Dividend rate on preferred stock

Dividend rate on preferred stock=$47,250/$787,500

                                                       =6%

The arrears of $73,800 would not impact the retained earnings,they are to be declared before the impact is felt in retained earnings.

Answer 2

The answers to all the parts of the question are as follows:

a) Common stock outstanding is 558,100

b) Stated value of the common stock is $4 per share

c) Par value of the preferred stock is $105 per share

d) Dividend rate is 6%

e) The arrear of $73,800 will not affect the balance of retained earnings recorded under the balance sheet.

Computations:

a) The shares of common stock outstanding are:

$\begin{aligned}\text{Outstanding Common stock}&=\text{Common stock issued}-\text{Treasury stock}\\&=565,000-6,900\\&=558,100 \end{aligned}$

b) Stated value of the common stock:

$\begin{aligned}\text{Stated Value of common stock}&=\frac{\text{Total value of shares issued}}{\text{Common stock issued}}\\&=\frac{\ 2,260,000}{565,000}\\&=\ 4\;\text{per share} \end{aligned}$

c) Par value of the preferred stock:

$\begin{aligned}\text{Par value of preferred stock}&=\frac{\text{Total value of shares issued}}{\text{Preferred Shares issued}}\\&=\frac{\ 7,87,500}{7,500}\\&=\ 105\;\text{per share} \end{aligned}$

d) Annual dividend rate on preferred stock:

$\begin{aligned}\text{Dividend rate on preferred stock}&=\frac{\text{Preferred dividend}}{\text{Preferred share capital}}\\&=\frac{\ 47,250}{\ 787,500}\times100\\&=6\% \end{aligned}$

e) Any amount of preferred dividend whose amount is under arrears then will not affect the balances reported for the retained earnings, this is because the amount of arrear of dividend is already under the note with the balance sheet.

To know more about common stock and preferred stock, refer to the  link:

https://brainly.com/question/9971462