Question

Changes in stockholders' equity Listed are the equity sections of balance sheets for years 2014 and 2015 as reported by Mountain Air Ski Resorts, Inc. The overall value of stockholders' equity has risen from $1,800,000 to $7,200,000. Use the statements to discover how and why this happened. The company paid total dividends of $210,000 during fiscal 2015.

Mountain Air Ski Resorts, Inc. Balance Sheet (partial)
Stockholder's Equity 2014 2015
Common stock ($1.00 par)
authorized 4,600,000 shares
outstanding 1,600,000 shares 2015 $1,600,000
outstanding 480,000 shares 2014 $480,000
Paid-in capital in excess of par 520,000 4,100,000
Retained earnings 800,000 1,500,000
Total stockholder's equity $1,800,000 $7,200,000

a. Mountain Air's net income for fiscal 2015 is $_____. Round to the nearest dollar.
b. The number of new shares issued is shares _____. Round to the nearest integer.
c. The price per share of the new stock sold during 2015 is $_____. Round to the nearest cent.
d. The original price of the shares was $_____. (Round to the nearest cent.)

Answer 1

a. Mountain Air's net income for fiscal 2015 is $910,000.

b. The number of new shares issued is 1,120,000.

c. The price per share of the new stock sold during 2015 is $4.20.

d. The original price of the shares was $2.08.

a. The net income is

= $1,500,000 - $800,000 + $210,000

= $910,000

b. The number of  New Share issued is

= 1,600,000 - 480,000

= 1,120,000

c. The price of the new stock per share sold is  

Par Value 1,120,000

Add: Paid In excess Of par (4,100,000 - 520,000) 3,580,000

Net Proceeds from issuance of shares 4,700,000

Number of New Share Issued 1,120,000

Now  

The Average price per share of the new stock sold is

= 4,700,000 ÷ 1,120,000

= $4.20

d. The original price of the share is  

The original issuance price is

= (Paid-in-capital account + common stock account) ÷ original shares  

= (520,000 + 480,000) ÷ 480,000

= $2.08

Therefore we can conclude that

a. Mountain Air's net income for fiscal 2015 is $910,000.

b. The number of new shares issued is 1,120,000.

c. The price per share of the new stock sold during 2015 is $4.20.

d. The original price of the shares was $2.08.

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