Math  /  Data & Statistics

QuestionLG 1 P3-10 Statement of retained earnings Hayes Enterprises began 2015 with a retained earnings balance of $1,151,000\$ 1,151,000. During 2015 , the firm earned $528,000\$ 528,000 after taxes. From this amount, preferred stockholders were paid $98,000\$ 98,000 in dividends. At yearend 2015, the firm's retained earnings totaled $1,324,000\$ 1,324,000. The firm had 100,000 shares of common stock outstanding during 2015. a. Prepare a statement of retained earnings for the year ended December 31, 2015, for Hayes Enterprises. (Note: Be sure to calculate and include the amount of cash dividends paid in 2015.) b. Calculate the firm's 2015 earnings per share (EPS). c. How large a per-share cash dividend did the firm pay on common stock during 2015?

Studdy Solution

STEP 1

What is this asking? We need to create a statement of retained earnings, calculate the earnings per share (EPS), and figure out how much dividend each common stock shareholder got. Watch out! Don't forget that preferred stockholders get paid *before* common stockholders!

STEP 2

1. Create the Statement of Retained Earnings
2. Calculate the Earnings Per Share (EPS)
3. Calculate the Dividend Per Share

STEP 3

Alright, we're starting this financial journey with a **beginning retained earnings balance** of $1,151,000\$1,151,000.
That's our starting point!

STEP 4

Next, let's add the money Hayes Enterprises earned during the year.
They made $528,000\$528,000 after taxes.
So, we add that to our retained earnings: $1,151,000+$528,000=$1,679,000\$1,151,000 + \$528,000 = \$1,679,000.
This is the total profit available to shareholders.

STEP 5

Now, remember those preferred stockholders?
They get paid first!
They received $98,000\$98,000 in dividends.
So, we subtract that from our current total: $1,679,000$98,000=$1,581,000\$1,679,000 - \$98,000 = \$1,581,000.

STEP 6

We know the **final retained earnings** balance is $1,324,000\$1,324,000.
To find out how much was paid in common stock dividends, we subtract the final balance from what we have now: $1,581,000$1,324,000=$257,000\$1,581,000 - \$1,324,000 = \$257,000.
That's what went to the common stockholders!

STEP 7

Remember, Hayes Enterprises earned $528,000\$528,000 and had 100,000100,000 shares outstanding.

STEP 8

To find the **EPS**, we divide the **net income** by the **number of outstanding shares**: $528,000100,000 shares=$5.28 per share \frac{\$528,000}{100,000 \text{ shares}} = \$5.28 \text{ per share} So, the **EPS** is $5.28\$5.28!

STEP 9

We found that $257,000\$257,000 was paid to common stockholders, and there are 100,000100,000 shares.

STEP 10

To find the **dividend per share**, we divide the **total common dividends** by the **number of outstanding shares**: $257,000100,000 shares=$2.57 per share \frac{\$257,000}{100,000 \text{ shares}} = \$2.57 \text{ per share} Each common share received a dividend of $2.57\$2.57!

STEP 11

**Statement of Retained Earnings:**
* Beginning Retained Earnings: $1,151,000\$1,151,000 * Add: Net Income: $528,000\$528,000 * Subtract: Preferred Dividends: $98,000\$98,000 * Subtract: Common Dividends: $257,000\$257,000 * Ending Retained Earnings: $1,324,000\$1,324,000
**Earnings Per Share (EPS):** $5.28\$5.28
**Dividends Per Share:** $2.57\$2.57

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