answer question 4,5,6 and 7 with formula Problem #14Shareholders' Equity TransactionsR. Carpio Products, Inc. was formed at the beginning of the year. Ordinary share has aP25 par value. The following entries affected the shareholders' equity during its firstyear's operations:a. Cash150,000Ordinary SharesShare Premium-Ordinary125,00025,000b. Organization ExpenseOrdinary SharesShare Premium-Ordinary75,00062,50012,500. CashOffice EquipmentBuildingAccounts Payable29,00010,75030,00029,75025,000Ordinary SharesShare Premium-Ordinary15,000d. Cash60,000Ordinary SharesShare Premium-Ordinary37,50022,500e. Cash Dividends7,500Cash Dividends Payable7,500f.Cash Dividends Payable7,500Cash7,500E. Income SummaryRetained Earnings30,00030,000h. Retained EarningsCash Dividends7,5007,500Required:Provide explanations for the journal entries and answer the following questions:1. What is the profit for the year?2. How many ordinary shares are outstanding?3. What is the legal capital?4. What is the total share capital?5. What is the retained earnings balance at the end of the year?6. What is the total shareholders' equity?7. What is the book value per share of the ordinary shares at the end of the year?

Answered: R. Carpio Products, Inc. was formed at…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter11: Stockholders' Equity

Section: Chapter Questions

Problem 11.13AMCP

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CHALLENGE PROBLEM This problem challenges you to apply your cumulative accounting knowledge to move a step beyond the material in the chapter. LeeJin Corp. started a two-year period with 200,000 shares of 2 par common stock outstanding. During the two years, LeeJin had the following capital stock transactions: (a) Declared a 10% common stock dividend. The market value of the common stock was estimated at 8 per share. (b) Declared a cash dividend of 0.20 per share on common stock. (c) Declared a 30% common stock dividend. The market value of the common stock was estimated at 9 per share. (d) Declared a cash dividend of 0.20 per share on common stock. (e) Declared a two-for-one stock split. (f) Declared a cash dividend of 0.16 per share on common stock. REQUIRED 1. Prepare general journal entries for each of the transactions. Identify each transaction by the appropriate letter. (Assume that any cash or share distributions have been completed and are a matter of record before the next transaction occurs.) 2. Compute the following: (a) Number of shares of common stock outstanding after all the transactions have been completed. (b) The par value per share of LeeJins common stock after all the transactions have been completed.
ALTERNATIVE DIVIDEND POLICIES Rubenstein Bros. Clothing is expecting to pay an annual dividend per share of 0.75 out of annual earnings per share of 2.25. Currently, Rubenstein Bros.' stock is selling for 12.50 per share. Adhering to the company's target capital structure, the firm has 10 million in total invested capital, of which 40% is funded by debt. Assume that the firm's book value of equity equals its market value. In past years, the firm has earned a return on equity (ROE) of 18%, which is expected to continue this year and into the foreseeable future. a. Based on this information, what long-run growth rate can the firm be expected to maintain? (Hint: g = Retention rate ROE.) b. What is the stock's required return? c. If the firm changed its dividend policy and paid an annual dividend of 1.50 per share, financial analysts would predict that the change in policy will have no effect on the firm's stock price or ROE. Therefore, what must be the firms new expected long-run growth rate and required return? d. Suppose instead that the firm has decided to proceed with its original plan of dis bursing 0.75 per share to shareholders, but the firm intends to do so in the form of a stock dividend rather than a cash dividend. The firm will allot new shares based on the current stock price of 12.50. In other words, for every 12.50 in dividends due to shareholders, a share of stock will be issued. How large will the stock dividend be relative to the firm's current market capitalist ion? (Hint. Remember that market capitalization = P0 number of shares outstanding.) e. If the plan in part d is implemented, how many new shares of stock will be issued, and by how much will the companys earnings per share be diluted?

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