Question

The stockholders’ equity section of Fauberg Marigny Corporation at December 31 is as follows.

FAUBERG MARIGNY CORPORATION
Balance Sheet (partial)
Stockholders' equity
Paid-in capital
Preferred stock, cumulative, 10,000 shares authorized,
5,000 shares issued and outstanding $300,000
Common stock, no par, 750,000 shares authorized,
150,000 shares issued 1,500,000
Total paid-in capital 1,800,000
Retained earnings 2,050,000
Total paid-in capital and retained earniings 3,850,000
Less: Treasury stock (5,000 common shares) (64,000)
Total stockholders' equity $3,786,000
From a review of the stockholders’ equity section:
1) How many shares of common stock are outstanding?
2) Assuming there is a stated value, what is the stated value of the common stock?Stated value of common stock per share.
3) What is the par value of the preferred stock?
4) If the annual dividend on preferred stock is $18,000, what is the dividend rate on preferred stock?
5) If dividends of $36,000 were in arrears on preferred stock, what would be the balance in retained earnings?

Answer 1

1. 295,000 shares

2. $10 per share

3. $60 per value

4. 6%

5. $2,046,400

Step-by-step explanation:

1. Calculation for How many shares of common stock are outstanding

Outstanding common stock 300,000 shares

Less Common shares 5,000

Common shares outstanding 295,000 shares

2. Calculation for the stated value of the common stock

Stated value of the common stock

$1,500,000/150,000

Stated value of the common stock = $10 per share

3. Calculation for What is the par value of the preferred stock

Par value of the preferred stock=$300,000/5,000

Par value of the preferred stock=$60 par value

4. Calculation for dividend rate on preferred stock

Dividend rate on preferred stock=$18,000/$300,000 = 6%

5. Calculation for what would be the balance in Retained Earnings

Balance in Retained Earnings= $2,050,000 -$36,000

Balance in Retained Earnings=$2,046,400