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Chapter 15: Question 19Q (page 810)
What factors influence the dividend policy of a company?
Dividend policies are affected by the profitability and availability of cash in the business.
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Wilco Corporation has the following account balances at December 31, 2017.
Common stock, \(5 par value \) 510,000
Treasury stock 90,000
Retained earnings 2,340,000
Paid-in capital in excess of par鈥攃ommon stock 1,320,000
Prepare Wilco鈥檚 December 31, 2017, stockholders鈥� equity section.
(Equity Transactions and Statement Preparation) On January 5, 2017, Phelps Corporation received a charter granting the right to issue 5,000 shares of \(100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of \)10 par value common stock. It then completed these transactions.
Jan. 11 Issued 20,000 shares of common stock at \(16 per share.
Feb. 1 Issued to Sanchez Corp. 4,000 shares of preferred stock for the
following assets: equipment with a fair value of \)50,000; a factory
building with a fair value of \(160,000; and land with an
appraised value of \)270,000.
July 29 Purchased 1,800 shares of common stock at \(17 per share. (Use cost
method.)
Aug. 10 Sold the 1,800 treasury shares at \)14 per share.
Dec. 31 Declared a \(0.25 per share cash dividend on the common stock and
declared the preferred dividend.
Dec. 31 Closed the Income Summary account. There was a \)175,700 net
income.
Instructions
(Equity Items on the Balance Sheet) The following are selected transactions that may affect stockholders鈥� equity.
Instructions
In the following table, indicate the effect each of the nine transactions has on the financial statement elements listed. Use the following code: I = Increase, D = Decrease, NE = No effect.
Item | Asset | Liabilities | Stockholders鈥� Equity | Paid-in Capital | Retained Earnings | Net Income |
(Stock Split and Stock Dividend) The common stock of Alexander Hamilton Inc. is currently selling at \(120 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is \)10; book value is $70 per share. Nine million shares are issued and outstanding.
Instructions
Prepare the necessary journal entries assuming the following
(Treasury Stock Transactions and Presentation) Clemson Company had the following stockholders鈥� equity as of January 1, 2017
Common stock, \(5 par value, 20,000 shares issued \)100,000
Paid-in capital in excess of par鈥攃ommon stock 300,000
Retained earnings 320,000
Total stockholders鈥� equity \(720,000
During 2017, the following transactions occurred.
Feb.1 Clemson repurchased 2,000 shares of treasury stock at a price of \)19
per share.
Mar.1 800 shares of treasury stock repurchased above were reissued at \(17
per share.
Mar.18 500 shares of treasury stock repurchased above were reissued at \)14
per share.
Apr. 22 600 shares of treasury stock repurchased above were reissued at \(20
per share.
Instructions
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