Problem 1:

The stockholders' equity section of the balance sheet of Benson Corporation (with certain details omitted) appears below:

Answer the following questions based on the stockholders' equity section given above.

1. How many shares of common stock are issued and outstanding?

2. What is the total amount of dividends paid annually to the preferred stockholders?

3. What is the total amount of legal capital?

4. What is the total amount of paid-in capital?

5. What is the average issue price of a share of common stock?

6. What is the book value of each share of common stock? (Assume no dividends in arrears)

7. The balance in retained earnings at the beginning of the current year was $575,000, and there were no dividends in arrears.

Net income for the current year was $360,000. What is the amount of the dividends declared on each share of common stock during the current year?

Problem 2: Short-answer questions

1. What are the rights to which common stockholders are entitled?

2. Name three features of preferred stock?

3. What is meant by market value of the stock, and where can it be found?

4. Explain what is meant by treasury stock.

5. Define what is a public corporation.

Problem 3: Stock splits

Stockholders' Equity:

8% cumulative preferred stock, $100 par,

50,000 shares authorized; 15,000 shares issued..................... . $1,500,000

Common stock, $6 par, 1,500,000 shares authorized,1.000.000 shares

Outstanding ....................................................................................... 6,000,000

Additional paid-in capital: preferred stock .......................................... 260,000

Additional paid-in capital: common stock .......................................... 3,600,000

Retained earnings ............................................................................. 2,360,000

Given the stockholders' equity section above:

a. Compute the effect of a 2 to 1 split on the par value and number shares of the common stock.

b. Compute the effect of a 4 to 1 split on the par value and number shares of the common stock.

c. Does the stock split have any effect on the company's stockholders' equity?