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Math  /  Data & Statistics

QuestionPA11-3 (Algo) Finding Missing Amounts [LO 11-2, LO 11-3, LO 11-5]
At December 31, the records of Kozmetsky Corporation provided the following selected and incomplete data: Common stock (par \2;nochangesduringthecurrentyear).Sharesauthorized,5,000,000.Sharesissued,?;issueprice$8pershare.Sharesheldastreasurystock,11,200shares,cost2; no changes during the current year). Shares authorized, 5,000,000. Shares issued, ? ; issue price \$8 per share. Shares held as treasury stock, 11,200 shares, cost \6 6 per share. Net income for the current year, \$452,160. Common Stock account, \$148,000. Dividends declared and paid during the current year, \$2 per share. Retained Earnings balance, beginning of year, \$780,000. Required: Complete the following: Note: Round "Earnings per share" to 2 decimal places. \begin{tabular}{|l|l|} \hline 1-a. Shares issued & \\ \hline 1-b. Shares outstanding & \\ \hline 2. The balance in Additional Paid-in Capital would be \\ \hline 3. Earnings per share is & \\ \hline 4. Total dividends paid on common stock during the current year is & \\ \hline 5. Treasury stock should be reported in the stockholders' equity section of the balance sheet in the amount of & \\ \hline 6. Assume that the board of directors voted a 2-for-1 stock split. After the stock split, the par value per share will be & \\ \hline \end{tabular}

Studdy Solution

STEP 1

1. The par value of common stock is 2.<br/>2.Theissuepriceofcommonstockis2.<br />2. The issue price of common stock is 8 per share.
3. Treasury stock consists of 11,200 shares at a cost of 6pershare.<br/>4.Netincomeforthecurrentyearis6 per share.<br />4. Net income for the current year is 452,160.
5. The beginning balance of Retained Earnings is 780,000.<br/>6.Dividendsdeclaredandpaidduringthecurrentyearare780,000.<br />6. Dividends declared and paid during the current year are 2 per share.

STEP 2

1. Calculate the number of shares issued.
2. Calculate the number of shares outstanding.
3. Calculate the balance in Additional Paid-in Capital.
4. Calculate Earnings per Share.
5. Calculate total dividends paid on common stock.
6. Determine the amount of Treasury Stock in the equity section.
7. Calculate the new par value per share after a 2-for-1 stock split.

STEP 3

Calculate the number of shares issued using the Common Stock account balance:
Common Stock account=Shares issued×Par value\text{Common Stock account} = \text{Shares issued} \times \text{Par value}
148,000=Shares issued×2148,000 = \text{Shares issued} \times 2
Shares issued=148,0002=74,000\text{Shares issued} = \frac{148,000}{2} = 74,000

STEP 4

Calculate the number of shares outstanding:
Shares outstanding=Shares issued−Treasury shares\text{Shares outstanding} = \text{Shares issued} - \text{Treasury shares}
Shares outstanding=74,000−11,200=62,800\text{Shares outstanding} = 74,000 - 11,200 = 62,800

STEP 5

Calculate the balance in Additional Paid-in Capital:
Additional Paid-in Capital=(Issue price−Par value)×Shares issued\text{Additional Paid-in Capital} = (\text{Issue price} - \text{Par value}) \times \text{Shares issued}
Additional Paid-in Capital=(8−2)×74,000=6×74,000=444,000\text{Additional Paid-in Capital} = (8 - 2) \times 74,000 = 6 \times 74,000 = 444,000

STEP 6

Calculate Earnings per Share:
Earnings per Share=Net IncomeShares outstanding\text{Earnings per Share} = \frac{\text{Net Income}}{\text{Shares outstanding}}
Earnings per Share=452,16062,800≈7.20\text{Earnings per Share} = \frac{452,160}{62,800} \approx 7.20

STEP 7

Calculate total dividends paid on common stock:
Total Dividends=Dividends per share×Shares outstanding\text{Total Dividends} = \text{Dividends per share} \times \text{Shares outstanding}
Total Dividends=2×62,800=125,600\text{Total Dividends} = 2 \times 62,800 = 125,600

STEP 8

Calculate the amount of Treasury Stock in the equity section:
Treasury Stock=Treasury shares×Cost per share\text{Treasury Stock} = \text{Treasury shares} \times \text{Cost per share}
Treasury Stock=11,200×6=67,200\text{Treasury Stock} = 11,200 \times 6 = 67,200

STEP 9

Calculate the new par value per share after a 2-for-1 stock split:
New Par Value=Old Par Value2\text{New Par Value} = \frac{\text{Old Par Value}}{2}
New Par Value=22=1\text{New Par Value} = \frac{2}{2} = 1
The completed table is:
\begin{tabular}{|l|l|} \hline 1-a. Shares issued & 74,000 \\ \hline 1-b. Shares outstanding & 62,800 \\ \hline 2. The balance in Additional Paid-in Capital would be & 444,000 \\ \hline 3. Earnings per share is & 7.20 \\ \hline 4. Total dividends paid on common stock during the current year is & 125,600 \\ \hline 5. Treasury stock should be reported in the stockholders' equity section of the balance sheet in the amount of & 67,200 \\ \hline 6. Assume that the board of directors voted a 2-for-1 stock split. After the stock split, the par value per share will be & 1 \\ \hline \end{tabular}

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