Question

the stockholders' equity accounts of culver corporation on january 1, 2025, were as follows. preferred stock (7%, $100 par noncumulative, 8,000 shares authorized) $480,000 common stock ($4 stated value, 480,000 shares authorized) 1,600,000 paid-in capital in excess of par-preferred stock 24,000 paid-in capital in excess of stated value-common stock 768,000 retained earnings 1,100,800 treasury stock (8,000 common shares) 64,000 during 2025, the corporation had the following transactions and events pertaining to its stockholders' equity. feb. 1 issued 8,000 shares of common stock for $48,000. mar. 20 purchased 1,600 additional shares of common treasury stock at $7 per share. oct. 1 declared a 7% cash dividend on preferred stock, payable november 1. nov. 1 paid the dividend declared on october 1. dec. 1 declared a $0.50 per share cash dividend to common stockholders of record on december 15, payable december 31, 2 dec. 31 determined that net income for the year was $450,000. paid the dividend declared on december 1.

Answer 1

a) Feb. 1 Gave 8,000 portions of common stock for $48,000.

Dr Money 48,000

Cr Common stock 32,000

Cr Paid-in Capital in Excess of Stated Value - Common Stock 16,000

Deface. 20 Bought 1,600 additional portions of common depository stock at $7 per share

Dr Depository stock 11,200

   Cr Money 11,200

Oct. 1 Proclaimed a 7% money profit on favored stock, payable November 1.

Dr Retained earnings (4,800 x 100 x 7%) 33,600

   Cr Favored profits payable 33,600

Nov. 1 Delivered the profit proclaimed on October 1.

Dr Favored profits payable 33,600

   Cr Money 33,600

Dec. 1 Proclaimed a $0.50 per share cash profit to common investors of record on December 15, payable December 31, 2022.

Dr Retained earnings (398,400 x $0.50) 199,200

   Cr Common profits payable 199,200

Dec. 31 Determined that total compensation for the year was $450,000. Delivered the profit pronounced on December 1.

Dr Common profits payable 199,200

   Cr Money 199,200

Dr Income rundown 450,000

   Cr Retained earnings 450,000

b) T-accounts

Common stock

charge credit

                      $1,600,000

                      $32,000

                      $1,632,000

Paid-in capital in excess of standard value - common stock

charge credit

                      $768,000

                      $16,000

                      $784,000

Depository stocks

charge credit

$64,000

$11,200

$75,200

Retained earnings

charge credit

                      $1,100,800

$33,600

$199,200

                      $450,000

                      $1,318,000

Favored stocks

charge credit

                      $480,000

Paid-in Capital in Excess of Stated Value - Common Stock

charge credit

                      $24,000

c) Investors' equity section

Paid-in capital:

Favored Stock (7%, $100 standard $480,000

noncumulative, 8,000 offers approved)

Paid-in Capital in Excess of Standard $24,000 $504,000

Value - Favored Stock

Common Stock ($4 stated value, $1,632,000

480,000 offers approved)

Paid-in capital in excess of standard $784,000 $2,416,000

value - common stock

All out paid-in capital $2,920,000

Retained Earnings $1,318,000

Depository Stock (9,600 common offers) ($75,200)

All out investors' equity $4,162,800

d) payout proportion = profits per share/EPS

profits per share = $0.50

EPS = $1.04

payout proportion = $0.50/$1.04 = 0.48 = 48%

EPS = (overall gain - favored profits)/weighted normal offers outstanding

net gain = $450,000

favored profits = $33,600

weighted normal offers outstanding = 400,000 - 8,000 + (8,000 x 11/12) - (1,600 x 79/365) = 398,987

EPS = ($450,000 - $33,600)/398,987 = $1.0436 ≈ $1.04

return on common investors' equity = (overall gain - favored profits)/normal investor's equity

normal investors' equity = ($3,404,800 + $3,658,800)/2 = $3,531,800

return on common investors' equity = $416,400/$3,531,800 = 0.1179 = 11.79%

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