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Early 2014, H industries was forms with authorization to issue 250,000 share of $10 par value

Early 2014, H industries was forms with authorization to issue 250,000 share of $10 par value common stock and 30,000 shares of $100 par value cumulative preferred stock. During 2014, all preferred stock was issued at par, and 120,000 shares of common stock were sold for $16 per share. The preferred stock is entitled to a dividends equal to 10 percent of its par value before any dividends are paid  on the common stock.

During the first five years of business (2014 through 2018), the company earned income totaling$3,700,00 and paid dividends of 50 cents per share each year on the common stock outstanding.

On January 2,2016, the company purchased 20,000 shares of its own common stock in the open market for $400,00. On January 2, 2018, it reissued 10,000 shares of this thesauri stock for $250,000. The remaining 10,000 were still held in treasury at December 31,2018.

 

  1. Prepare the stockholders’ equity section of the balance sheet H industries at December 31, 2018. Include supporting showing (1) your computation of any paid-in capital on treasury stock and (2) retained earnings at balance sheet data. (income increase retained earnings, whereas dividends reduce retained earnings. Dividends are not paid share of stock held treasury).

 

  1. As December 31, compute H industries book value pe share of common stock. (book value pe share is computed only on the share stock outstanding)
  2. At December 31,2018 shares at the company’s common stock were trading at $30. Explain what would have happened to the market price per share had the company split its stock 3-for-1 at this date. Could you also explain what would have happened to the per value of the common stock and to the number of common shares outstanding.

 

 

 

 

Sep 09 2020 View more View Less

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