stockholders' Equity © Cambridge Business Publishers 3. Kate also wishes to pay dividends on both her common shares and the preferred stock. She is a little confused between cash and stock dividends. Explain the difference between a cash dividend and a stock dividend. Since Kate is the only stock- holder of the common stock, what would be the effect of issuing a 10 percent stock dividend? 4. Kate decides to issue cash dividends on both the common stock and the preferred stock. Currently there are 50 outstanding preferred shares and 500 common shares outstanding. The dividends that Kate paid were $6 per share on the preferred shares and $2 per share on the common shares. Provide the journal entry for the payment of the cash dividends. 5. Kate's Cards has a net income of $1,500 for the current month of August 2019. Kate had decided that the business will have a fiscal year-end of August 31, so this is the completion of the com- pany's first year. Kate will be preparing her annual financial statements; however, she would also like to see a monthly statement of retained earnings for August 2019. In addition, she would like to see how the stockholders’equity section of the balance sheet will look after the addition of the preferred stock. The stockholders' equity section from July 2019 is shown below: Stockholders' Equity Common stock (5,000 shares authorized, 500 shares issued and outstanding) Paid-in capital in excess of par value-common stock Retained earnings $ 500 9,500 15,000 $25,000 Total stockholders' equity .. Prepare a statement of retained earnings for the month of August 2019 and the stockholders' equity section of the balance sheet as of August 31, 2019.
stockholders' Equity © Cambridge Business Publishers 3. Kate also wishes to pay dividends on both her common shares and the preferred stock. She is a little confused between cash and stock dividends. Explain the difference between a cash dividend and a stock dividend. Since Kate is the only stock- holder of the common stock, what would be the effect of issuing a 10 percent stock dividend? 4. Kate decides to issue cash dividends on both the common stock and the preferred stock. Currently there are 50 outstanding preferred shares and 500 common shares outstanding. The dividends that Kate paid were $6 per share on the preferred shares and $2 per share on the common shares. Provide the journal entry for the payment of the cash dividends. 5. Kate's Cards has a net income of $1,500 for the current month of August 2019. Kate had decided that the business will have a fiscal year-end of August 31, so this is the completion of the com- pany's first year. Kate will be preparing her annual financial statements; however, she would also like to see a monthly statement of retained earnings for August 2019. In addition, she would like to see how the stockholders’equity section of the balance sheet will look after the addition of the preferred stock. The stockholders' equity section from July 2019 is shown below: Stockholders' Equity Common stock (5,000 shares authorized, 500 shares issued and outstanding) Paid-in capital in excess of par value-common stock Retained earnings $ 500 9,500 15,000 $25,000 Total stockholders' equity .. Prepare a statement of retained earnings for the month of August 2019 and the stockholders' equity section of the balance sheet as of August 31, 2019.
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter4: Balance Sheet: Presenting And Analyzing Resources And Financing
Section: Chapter Questions
Problem 18E
Related questions
Question
Please answer questions 4-5
Transcribed Image Text:SERIAL PROBLEM: KATE'S CARDS
(Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters 1 through 10.)
Kate's business continues to flourish. It hardly seems that just eleven months ago, in September of
2018, Kate started the business. She is especially pleased that she was able to successfully defend
herself against what turned out to be a mistaken attempt to sue her for copyright infringement. She
was able to clearly demonstrate that her card designs were unique and significantly different from
the designs sold by Mega Cards.
Kate has decided to take on an investor. Taylor Kasey believes that Kate's Cards represents a
good investment and wishes to invest money to help Kate expand the business. Kate, however, is
somewhat unsure how to structure Taylor's investment. Taylor wishes to be an equity investor rather
than simply providing a loan to Kate. Kate wants to know whether she should issue Taylor common
stock or preferred stock for her investment.
SP11.
Ка
1. Discuss the difference between the two classes of stock and suggest which type is more ap-
propriate for Kate to issue.
2. Kate has decided that she does not want to give up voting control of Kate's Cards. Since Taylor
prefers to be a passive investor, but does wish to have a steady income from dividends, the
decision is made to issue 50 shares of $100 par value, six percent cumulative preferred stock.
Provide the journal entry to record the issuance of the preferred stock for cash.
Transcribed Image Text:Stockholders' Equity
© Cambridge Business Publishers
3. Kate also wishes to pay dividends on both her common shares and the preferred stock. She is
a little confused between cash and stock dividends.
Explain the difference between a cash dividend and a stock dividend. Since Kate is the only stock-
holder of the common stock, what would be the effect of issuing a 10 percent stock dividend?
4. Kate decides to issue cash dividends on both the common stock and the preferred stock. Currently
there are 50 outstanding preferred shares and 500 common shares outstanding. The dividends that
Kate paid were $6 per share on the preferred shares and $2 per share on the common shares.
Provide the journal entry for the payment of the cash dividends.
5. Kate's Cards has a net income of $1,500 for the current month of August 2019. Kate had decided
that the business will have a fiscal year-end of August 31, so this is the completion of the com-
pany's first year. Kate will be preparing her annual financial statements; however, she would also
like to see a monthly statement of retained earnings for August 2019. In addition, she would like
to see how the stockholders' equity section of the balance sheet will look after the addition of the
preferred stock. The stockholders' equity section from July 2019 is shown below:
Stockholders' Equity
Common stock (5,000 shares authorized, 500 shares issued and outstanding)
Paid-in capital in excess of par value-common stock
Retained earnings
look
$ 500
9,500
15,000
$25,000
Total stockholders' equity.
Prepare a statement of retained earnings for the month of August 2019 and the stockholders'
equity section of the balance sheet as of August 31, 2019.
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