PROBLEM $11\mathrm{.}9$B Reporting Stockholders' Equity with Treasury Stork and Stoek Splits SO$11-4,(8)$ LO$11-5,$ LOH$-7,$ LO$11-8,$ LO$11-9$

Early in $2020,$ Laird Industries was formed with asthorization to ismee $150,000$ shares of $$20$ par value common stoek and $10\mathrm{.}000$ shares of $$100$ par value cumulative peeferred stock. During $2020,$ all the peeferred stock was lisued at par, and $80,000$ shares of common stock were sold for $$35$ per share. The peeferred stock is entitled to a dividend equal to $6$ persent of ies par valoe before any dividenda are paid on the common stock.

During its firs five years of business $(2020$ th yagh $2024),$ the company earned income totaling $$3,800,000$ and paid dividends of $60$ eents per share each year on the common stock outtitanding.

On January $2,2022,$ the eompary perchased $1,000$ shares of its own common atock in the open market for $$40,000.$ On January $2.2024,$ it reiswoed $600$ ahares of this treanury stook for $$30,000.$ The remaining $400$ shares were still held in treaury at December $31,2024.$

Instructions

a$.$ Prepare the stoskholders' equity sevtion of the balasee sheet at Deeember $34,2024.$ Include a supporting schedule showing: $(1)$ your computation of any paid in eapital en treasury stock and $(2)$ retained earnings at the balance sheet date. $($Hint: Net income increases retaised earnings, whereas dividends refuce retalued earnings. Dividends we not paid on shares of stock hald in treasury.$)$

b$.$ As of Desember $31,2024,$ eompute the compan's book valae per share of eommon noek. $($Hint: Book veles per share is computed only os the shares of stock eutstanding.$)$

$6.$ A December $31,2024,$ shares of the sompary's common stoek evee trading at $$56.$ Explain what would have happened to the market pries per shase had the eompany splin its atook $2$ For $1$ at this date. Also explais what wevid have happened to the par value of the common stoek and to the number of sommon shares outstasding.