Pranks, Inc. is a manufacturer of joke and novelty products for perpetrators of practical jokes. The corporation has paid several cash dividends throughout 2016, and is also declaring a stock dividend to its stockholders as the calendar year-end approaches. You’ve been brought in as a consultant to assist with this process, and also to help determine whether some missing information can be calculated before the distribution of the stock dividend is made. The company has two classes of stock: common stock and cumulative preferred stock.

You’ve been able to retrieve the following information so far:

Number of common shares authorized	900,000
Number of common shares issued	500,000
Par value of common shares	$20
Par value of cumulative preferred shares	$30
Paid-in capital in excess of par-common stock	$7,000,000
Paid-in capital in excess of par-preferred stock	$0
Total retained earnings before the stock dividend is declared	$33,500,000

Question #1

How many shares of common stock are outstanding? 500,000

How many shares of preferred stock are outstanding?100,000

What is the preferred dividend as a percent of par? ?

Question #2

The company declared a 4% common stock dividend on December 1, and would like you to calculate the following pieces of missing information. The market value of the common shares is $25.00 on December 1, and is $30.00 on the actual distribution date of the stock, December 31.

Fill in the missing information below, using the information given and your work on the other panels. All “before” items are before the stock dividend was declared. All “after” items are after the stock dividend was declared and closing entries were recorded at the end of the year.

Total paid-in capital before the stock dividend 20,000
Total retained earnings before the stock dividend 33,500
Total stockholders’ equity before the stock dividend 53500
Total paid-in capital after the stock dividend ?
Total retained earnings after the stock dividend ?
Total stockholders’ equity after the stock dividend ?

	Total Cash	Preferred Dividends		Common Dividends
Year	Dividends	Total	Per Share	Total	Per Share
2011	20,000	20,000	0.20	0	0.00
2012	36,000	36,000	0.36	0	0.00
2013	79,000	34,000	0.34	45,000	0.09
2014	105,000	30,000	0.30	75,000	0.15
2015	120,000	30,000	0.30	90,000	0.18
2016	180,000	30,000	0.30	150,000	0.30

Answer rating: 100% (QA)

Answer Total paidin capital before the stock dividend 20000 Total retained earnings before ... View the full answer