4.
P9. Preferred and Common Stock Dividends and Dividend Yield (Concluded)
Both cumulative and noncumulative preferred stock have a fixed level of dividends
and are thus similar in this way to long-term debt, which has a fixed level of inter-
no dividends are ever declared, then the past dividends do not need to be made up;
however, any past interest on debt becomes a liability of the company and is not
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Note: No entry necessary for October 25.
$19,100
P10. Comprehensive Stockholders’ Equity Transactions and Financial Ratios
1.
Dividends PayableCash
Total
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2.
P10. Comprehensive Stockholders’ Equity Transactions and Financial Ratios (Continued)
Gorlin Corporation
Stockholders’ Equity
Contributed capital:
Balance Sheet
October 31, 2014
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3.
*
**
4.
Market Price per Share
Earnings per Share
$1,698,950
Dividends per Share
Market Price per Share
Dividend Yield
Gorlin’s dividend yield is only 0.4 percent, which means that investors must also
Price/Earnings
(P/E) Ratio =
2.7 percent is low and will not encourage a rise in the company’s stock or an ex-
$440,000 + $192,000 + $1,000,000 = $1,632,000
Rounded
P10. Comprehensive Stockholders’ Equity Transactions and Financial Ratios (Concluded)
=
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1.
15
*
2.
Credited
Account
Number
no entry
Dollar
Amount
P11. Comprehensive Stockholders’ Equity Transactions
Common Shares
Debited
Dollar
Amount
no entry
Account
Number
The stockholders’ equity section of the balance sheet is an important factor in ana-
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1.
2.
balances and some accounting entries have decreased the account balances.
P12. Treasury Stock
Cash
Note: There are abnormal balances because there are no data about the beginning
form of cash back from the company.
sult of buying treasury stock is to reduce the number of shares outstanding, thereby
Common Stock
Treasury stock is a repurchase of a company’s own common stock. To treat it as an
investment would have the effect of the company investing in itself. In fact, the re-
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1.
2
1
2
2
2.
December 31, 2014
Contributed capital:
×
Bal.
200,000 shares × 10% × $16 = $320,000
422,000 shares × 5% × $9 = $189,900
Common stock, $2 par value, 500,000 shares
authorized, 440,000 shares issued, 422,000
220,000 440,000Shares outstanding after split: =
200,000Shares outstanding before split: 220,000=+
189,900
509,90042,200
Bal.
12/31
Treasury Stock
Villa Corporation
20,000
March 25 — no entry
Retained Earnings
P13. Dividends, Stock Splits, and Stockholders’ Equity
42,200
August 3 — no entry
Additional Paid-in CapitalCommon Stock
Stockholders’ Equity
12/31
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P13. Dividends, Stock Splits, and Stockholders’ Equity (Concluded)
Your proportionate share would be the same because other shareholders would
receive the same proportionate distributions.
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