How many shares will the company distribute as a stock

Question

Assignment

Problem I: Indicate whether each of the following statements is true (T) or false (F).

a.	___	Privately held corporations tend to have more stockholders than publicly held ones.
b.	___	Only individuals may qualify as stockholders.
c.	___	Both public and private corporations are regulated by the Securities and Exchange Commission (SEC).
d.	___	A corporation is not required to pay yearly dividends to its stockholders.
e.	___	Stockholders are held personally liable for debts the corporation incurs but is unable to pay back.
f.	___	An S-corporation is a type of corporation which avoids double taxation and also allows stockholders to receive limited liability.
g.	___	A privately-held corporation automatically qualifies as an S-corporation.
h.	___	A corporation should list its "Treasury Stock" as an asset on its balance sheet.
i.	___	Preferred stock shareholders should always receive a higher dividend per share than common stock shareholders.
j.	___	Treasury shares are entitled to receive their share of dividends declared.
k.	___	Expressed as a percentage of the total outstanding shares, stock dividends result in a shareholder maintaining the same ownership percentage after the stock dividend as the shareholder held before.
l.	___	The amount of dividends-in-arrears on preferred stock should appear in the liability section of the balance sheet.
m.	___	All else being equal, earnings per share is decreased when a company purchases treasury stock.
n.	___	A stock dividend has no effect on the total stockholders' equity balance.
o.	___	The higher a stock's par value, the higher its market value should be.

Problem II: Each of the following transactions are for the same company. For each transaction, prepare the required journal entry and answer the two questionswhich immediately follow.

A. On 8/1/X4, Oberlin Corp. issued 4,000 shares of $10 par common stock for $28 per share. These are the first shares Oberlin has issued.

Date	Account Name	Debit	Credit
8/1/X4

Question #1: Using the words increase, decrease, or no effect along with the amount, indicate how this transaction affects each component of Oberlin's accounting equation?

Question #2: After the above transaction, how many shares are issued and outstanding as of August 1, 20X4?

B. Continuing with the above, on 10/1/X4, Oberlin Corp. bought back 600 shares of its $10 par common stock for $30 per share. Oberlin uses the cost method to account for its treasury stock.

Date	Account Name	Debit	Credit
10/1/X4

Question #1: Using the words increase, decrease, or no effect along with the amount, indicate how this transaction affects each component of Oberlin's accounting equation? Note: "no effect" must be indicated where appropriate.

Question #2: How many shares are issued and outstanding as of October 1, 20X4?

Problem III: The stockholders' equity section ofPreston Inc.'s balance sheet at 12/31/X4 is as follows:

Common stock:	$5 par, 400,000 shares authorized, 300,000 shares issued, and 275,000 shares outstanding	$1,500,000
Paid-in capital in excess of par		1,000,000
Total paid-in capital		2,500,000
Retained earnings		5,000,000
Less: Treasury stock: 25,000 shares		(  250,000)
Total stockholders' equity		$7,250,000

Required: Using the above information, answer the following three questions:

Question #1: Assume Preston declares a cash dividend of $.50 per share on 5/1/X4 payable on 6/15/X4.  In the space below, prepare the journal entry on the declaration date and the subsequent payment date.

Date	Account Name	Debit	Credit
5/1/X4
6/15/X4

Question #2: Using the words increase, decrease, or no effect along with the amount, indicate how the 5/1/X4 transaction (dividend declaration) affects each component of Preston's accounting equation?

Question #3: Using the words increase, decrease, or no effect along with the amount, indicate how the 6/15/X4 transaction (dividend payment) affects each component of Preston's accounting equation?           

Problem IV:  Wolfpack Inc. has the following information available at 12/31/X4.

• Common Stock: $10 par value, 200,000 shares issued and outstanding.
• Preferred Stock: $75 par, 8%, 100,000 shares issued and outstanding.

Additional information: The preferred stock is cumulative and no dividends were paid in the prior year (20X3).  A total dividend of $1,500,000 is declared and paid in 20X4.

Question: What portion of the $1,500,000 total dividend should be allocated to the preferred and common shares? Complete the following chart below with your answers.

Problem V:  On February 1, 20X4,Lassiter Corp. has200,000 shares of $1 par common stock outstanding before it declares a 5% stock dividend. The market price per share is $65 on the declaration date.

A. How many shares will the company distribute as a stock dividend?

B. What will be the value of the shares distributed as a dividend? 

C. What will be the journal entry to record the issuance of this stock dividend? Assume the stock dividend is declared and distributed on the same day.

Date	Account Name	Debit	Credit
2/1/X4

Problem VI:  On February 1, 20X4,Kane Enterprises Inc. had 400,000 shares of $6 par common stock issued and outstanding before it declared a 2:1 stock split. The market price of Kane's stock immediately before the split was $200 per share.

Required: The chart below summarizes Kane's stock information immediately before the split. Complete the chart for Kane's stock information immediately after the split.

	# of Shares	Par Value per share	Total Par Value	Market price per share
Before split	400,000	$6	$2,400,000	$200
After 2:1 split

Problem VII: What does the return on common stockholders' equity (ROE) ratio measure?  (1-2 sentences)

A. The stockholders' equity section of Apple Inc.'s consolidated balance sheet is shown in Appendix A (page A-3) of your textbook. Its consolidated income statement is shown on page A-2.

Using its financial statements, answer the following questions:

*Note: Page references refer to the page numbers shown at the top of Apple's annual report.

	Page Reference*
a.	A-3	Question: How many shares of common stock were authorized at 9/27/14 and 9/28/13, respectively?
b.	A-3	Question: How many shares of common stock were issued and outstanding at 9/27/14 and 9/28/13, respectively?
c.	A-3	Question: Does Apple have any preferred stock issued and outstanding at either 9/27/14 or 9/28/13?
d.	A-2 and A-3	Question: What was Apple's return on common stockholders' equity (ROE) at 9/27/14?

Problem VIII: Briefly list four common reasons why a corporation might back its own stock.