SLACK TECHNOLOGIES 40 Point Problem Equity Portion of Balance Sheet Common Stock 5,000,000 shares authorized, 1,500,000 issued $180,000 Capital in excess of par value $15,000,000 Treasury Stock on Common 30,000 shares $303,600 Cumulative Preferred Stock 2,000,000 shares authorized, 500,000 issued $2 Dividend $10 par, $5,000,000 Capital Surplus [Excess of paid in Capital] $12,500,000 Treasury Stock on Preferred Stock 25,000 shares $875,000 I $20,202,021 Retained Earnings Inferred and Ans.1. Whenever cash dividend is declared, preference shareholders are paid first and in case of cumulative preference shares, previously unpaid preferred dividend (for years when dividend was not declared) is also paid, before any dividend payment to common shareholders. The balance left after payment to preference shareholders is dividend paid to common shareholders. Total cash dividend = $6,000,000 Preferred dividend = $2 per share * No. of outstanding preference shares No. Of outstanding preference shares = No. of issued shares - Treasury stock on preferred shares = 500,000 shares-25,000 shares =475,000 shares So, preferred dividend = $2 475,000 shares = $950,000 Common stock dividend = Total cash dividend- Preferred dividend = $6,000,000 - $950,000 = $5,050,000 Ans.2. Preference dividend for current year = $950,000 Add: Arrears of preference dividend for 4 years = $950,000 4 $3,800,000 Total preference dividend payable = $4,750,000 Common dividend = $6,000,000 - 4,750,000 = $1,250,000 Ans.3. No. Of common shares outstanding = No. of common shares issued - Treasury stock on common shares = 1,500,000 shares - 30,000 shares = 1,470,000 shares Ans.4. No. Of common shares issued = 1,500,000 TotalPar value = $180,000 So, par value per common share = $180,000/ 1,500,000 = $0.12 Total capital in excess of par common stock = $15,000,000 Capital in excess of par per common share= $15,000,000/1,500,000 =$10 So, initial issue price of common share = $0.12 + $10 = $10.12 Paragraph E 2. T AaBbCcDc AaBbCcDc AaBbCc AaBbcc AaB AaBbCct Ac Normal 1 No Spac... Heading 1 Heading 2 Title Subtitle Sub D 5. What was the initial stock price per share of the Preferred Stock? Styles 6. Using your answer to question one what is the payout rate per share for the preferred stock? 7. Using your answer to question one what is the payout rate per share for common stock? 8. If Slack company announces a 7 for 1 stock split of the cumulative preferred stock, then what is the impact on the balance sheet? 9. Could Slack issue a 3 to stock split on common? Explain. 10. If Slack were to provide for a 12% common stock dividend, then how many new shares are to be issued to existing Slack shareholders? 99+