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Stockholders' Equity Problems

Stockholders' Equity Problems - 200,000 shares x \$1 par...

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ADDITIONAL STOCKHOLDERS' EQUITY PROBLEMS Stock issuances, preparing Contributed Capital section of Balance Sheet, and computing EPS (adapted from part of a very old exam) Recording stock issuances and preparing contributed capital section of balance sheet: 1) Mexico, Inc. was organized in 2003. On September 6, 2003, Spain sold 800,000 shares of \$1 par value common stock at \$9 per share. Make the journal entry to record the issuance of the common stock. Answer: 800,000 shares x \$9 market value per share Cash 7,200,000 800,000 shares x \$1 par value per share Common Stock at par 800,000 800,000 shares x (\$9 - \$1) par value per share Additional Paid-In Capital (APIC) 6,400,000 2) On November 15, 2004, Mexico issued another 200,000 shares of \$1 par value common stock at \$10 per share. A) Make the entry to record this event, then B) Prepare the Contributed Capital section of Spain's balance sheet after these both stock issuances. Answer: (A) 200,000 shares x \$10 market value per share Cash 2,000,000
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Unformatted text preview: 200,000 shares x \$1 par value per share Common Stock at par 200,000 200,000 shares x (\$10- \$1) par value per share Additional Paid-In Capital (APIC) 1,800,000 Answer: (B) \$800,000 + \$200,000 from both issuances Common Stock, \$1 par value, 1,000,000 shares outstanding \$1,000,000 Additional Paid-In Capital 8,200,000 TOTAL CONTRIBUTED CAPITAL \$9,200,000 \$640,000 + \$180,000 from both issuances Computing earnings per share: Granada, Inc. was organized on January 1, 2004 with an issuance of 1,000,000 shares of common stock. On October 1, 2004, Granada sold another 900,000 shares of common stock. Net income for the firm in 2004 is \$4,400,000. The firm must pay \$700,000 of preferred stock dividends. Compute Earnings Per Share for 2004. Answer: Weighted Average # Common Shares Outstanding = 1,000,000 + (900,000 x 3/12) = 1,225,000 shares Net Income Preferred Dividends EPS = (\$4,400,000 - \$700,000) / 1,225,000 shares October, November, December = \$3.02 per share...
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