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PROBLEM 11-7B (Continued)
*(b) The book value of the common stock is $6.89 computed as follows:
Total stockholders’ equity ............................................. $6,403,000
Less: Preferred stock equity
BYP 11-1 FINANCIAL REPORTING PROBLEM
(a) The common stock of Apple has no par value.
(b) There are 1.8 million shares authorized of which 929.3 thousand are
(c) According to the Consolidated Statements of Shareholders’ Equity, Apple
BYP 11-2 COMPARATIVE ANALYSIS PROBLEM
(a) Percentage of authorized shares issued:
(b) Treasury shares, year-end 2011:
(c) Common or capital stock shares outstanding, year-end 2011:
(d)
PepsiCo
Coca-Cola
Earnings
per share
$6,443 – $1
1,580
= $4.08
$8,572 – $0
2,284
= $3.75
Return on
common
stockholders’
equity
$6,443 – $1
($20,704 + $21,273) ÷ 2
= 30.7%
$8,572 – $0
($31,635 + $31,003) ÷ 2
= 27.4%
The return on common stockholders’ equity can be used to compare
the profitability of two companies. It shows how many dollars of net
BYP 11-3 COMPARATIVE ANALYSIS PROBLEM
(a) Percentage of authorized shares issued:
(b) Treasury shares, year-end 2011:
(c) Common stock shares outstanding, year-end 2011:
*473 – 455
(d)
Amazon
Wal-Mart
Earnings
per share
$631 – $0
453
= $1.39
$15,699 – $0
3,460
= $4.54
company.
pay any dividends in 2011.
BYP 11-4 REAL-WORLD FOCUS
Answers will vary depending on the company chosen by the student.
BYP 11-5 DECISION MAKING ACROSS THE ORGANIZATION
(a) The cumulative provision means that preferred stockholders must be
paid both current-year dividends and unpaid prior-year dividends before
dividends in arrears.
(b) The market price of a share of stock is caused by many factors. Among
the factors to be considered are:
(1) the corporation’s anticipated future earnings,
(2) its expected dividend rate per share,
(3) its current financial position,
(4) the current state of the economy, and
(5) the current state of the securities markets.
Par value is not indicative of the worth or market value of the stock. The
significance of par value is a legal matter. Par value represents the legal
capital per share that must be retained in the business for the protection
of corporate creditors.
(c) A corporation may acquire treasury stock to:
(1) Reissue the shares to officers and employees under bonus and stock
compensation plans.
BYP 11-5 (Continued)
capital and retained earnings.
