Question

At December 31, the records of Nortech Corporation provided the following selected and incomplete data:

Common stock (par $1; no changes during the current year).
Shares authorized, 500,000.
Shares issued, ?; issue price $15 per share.
Common Stock account, $130,000.
Shares held as treasury stock, 2,300 shares, cost $13 per share.
Net income for the current year, $51,080.
Dividends declared and paid during the current year, $22,986.
Retained Earnings balance, beginning of the year, $148,000.

Required:
Complete the following:
1-a. Shares authorized
1-b. Shares issued
1-c. Shares outstanding
2. The balance in Additional Paid-in Capital would be
3. Earnings per share is
4. Dividends paid per share of common stock is
5. Treasury stock should be reported in the stockholders’ equity section of the balance sheet in the amount of
6. Assume that the board of directors approved a 2-for-1 stock split. After the stock split, the par value per share will be

Answer 1

The shares authorized is 500,000, the shares issued is 8,666, the shares outstanding is 6,366. The balance in Additional Paid-in Capital would be $121,994. The earnings per share is $8.02, the dividends paid per share of common stock is $3.61. Treasury stock should be reported in the stockholders' equity section of the balance sheet in the amount of $29,900. After the stock split, the par value per share will be $0.50.

Step-by-step explanation:

1-a. Shares authorized: The number of shares authorized is given as 500,000. This represents the total number of shares that the company is allowed to issue.

1-b. Shares issued: To find the number of shares issued, we need to divide the Common Stock account balance by the issue price per share. In this case, $130,000 / $15 = 8,666.67 shares. Since shares cannot be fractional, we round down to 8,666 shares.

1-c. Shares outstanding: The number of shares outstanding is calculated by subtracting the treasury stock from the shares issued. In this case, 8,666 - 2,300 = 6,366 shares.

2. The balance in Additional Paid-in Capital would be the difference between the issue price per share and the par value per share multiplied by the number of shares issued. In this case, ($15 - $1) * 8,666 = $121,994.

3. Earnings per share is calculated by dividing the net income for the current year by the number of shares outstanding. In this case, $51,080 / 6,366 = $8.02 per share.

4. Dividends paid per share of common stock is calculated by dividing the dividends declared and paid during the current year by the number of shares outstanding. In this case, $22,986 / 6,366 = $3.61 per share.

5. Treasury stock should be reported in the stockholders' equity section of the balance sheet in the amount of the cost of the shares held as treasury stock, which is 2,300 shares * $13 = $29,900.

6. After the stock split, the par value per share will be half of the original par value. Since the original par value was $1, the par value per share after the stock split will be $0.50.