The stockholders’ equity section of the balance sheet contains accounts such as the following:

• Common stock
• Preferred stock
• Additional paid-in capital
• Other accumulated comprehensive income
• Retained earnings

It is important to understand how changes in the accounts impact the balance sheet and the financial position of the organization.

Ginseng Inc. has $200,000 of 5%, $10 par value preferred stock and $450,000 of $5 par value common stock issued and outstanding on December 31, 2021.

There were no stock issuances, stock splits, or stock dividends for 2021. The organization's calendar year-end is on December 31, 2021.

Preferred stock did not receive any dividends for 2019 or 2020 because the company did not have adequate cash reserves to pay out dividends.

Preferred stock has a mix of characteristics. The percentages are detailed as follows:

• 10% of the preferred stock is noncumulative, nonparticipating.
• 20% of the preferred stock is cumulative, nonparticipating.
• 20% of the preferred stock is noncumulative, participating.
• 50% of the preferred stock is cumulative, participating.

The current year’s net income is $795,000, and the company declared and paid dividends of $50,000 during the calendar year.

The beginning retained earnings balance at January 1, 2021 was $600,000. The company also had $80,000 in Treasury stock at December 31, 2021.

Based on the information presented in the scenario about the stockholder equity accounts of Ginseng Inc., answer the following questions.

1. How many shares of preferred stock are outstanding on December 31, 2021?
2. How many shares of common stock are outstanding on December 31, 2021?
3. How many shares of the outstanding preferred stock are cumulative and participating at December 31, 2020?
4. How many shares of the outstanding preferred stock are noncumulative and participating at December 31, 2020?
5. How many shares of the outstanding preferred stock are cumulative and nonparticipating at December 31, 2020?
6. How many shares of the outstanding preferred stock are noncumulative and nonparticipating at December 31, 2020?
7. What amount of dividends in arrears was paid in 2021?
8. What is the ending retained earnings balance for the organization at December 31, 2021?
9. What type of account is Treasury stock?
10. What is the normal balance for retained earnings?
11. What is the normal balance for dividends?
12. How do cash dividends that have been declared but not paid impact retained earnings?

Answer rating: 100% (QA)

Shares of preferred stock outstanding as on December 31 2021 Answer 20000 Working No of shares outstanding Total par value of shares outstanding Par value per share 200000 10 20000 Shares of common st... View the full answer