Question 1

Dividends on preferred and common stock

Pecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: 20Y1, $60,000; 20Y2, $80,000; 20Y3, $160,000; 20Y4, $160,000; 20Y5, $170,000; and 20Y6, $180,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 400,000 shares of cumulative, preferred 2% stock, $10 par, and 500,000 shares of common stock, $15 par.

Required:

1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears at the beginning of 20Y1. Summarize the data in tabular form. If required, round your per share answers to two decimal places. If the amount is zero, please enter "0".

Year	Total Dividends	Preferred Dividends Total	Preferred Dividends Per Share	Common Dividends Total	Common Dividends Per Share
20Y1	$60,000	$fill in the blank 1	$fill in the blank 2	$fill in the blank 3	$fill in the blank 4
20Y2	80,000	fill in the blank 5	fill in the blank 6	fill in the blank 7	fill in the blank 8
20Y3	160,000	fill in the blank 9	fill in the blank 10	fill in the blank 11	fill in the blank 12
20Y4	160,000	fill in the blank 13	fill in the blank 14	fill in the blank 15	fill in the blank 16
20Y5	170,000	fill in the blank 17	fill in the blank 18	fill in the blank 19	fill in the blank 20
20Y6	180,000	fill in the blank 21	fill in the blank 22	fill in the blank 23	fill in the blank 24
Total			$fill in the blank 25		$fill in the blank 26

2. Determine the average annual dividend per share for each class of stock for the six-year period. If required, round your answers to two decimal places.

Line Item Description	Amount
Average annual dividend for preferred	$fill in the blank 27 per share
Average annual dividend for common	$fill in the blank 28 per share

3. Assuming a market price per share of $25.00 for the preferred stock and $22.00 for the common stock, determine the average annual percentage return on initial shareholders investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.

Round your answers to one decimal place.

Line Item Description	Percentage
Preferred stock	fill in the blank 29 %
Common stock	fill in the blank 30 %

Issuing stock

Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 50,000 shares of preferred 2% stock, $60 par and 1,000,000 shares of $8 par common stock. The following selected transactions were completed during the first year of operations:

Journalize the transactions.

If an amount box does not require an entry, leave it blank.

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Feb. 5. Issued 600,000 shares of common stock at par for cash.

Date	Account	Debit	Credit
Feb. 5	CashCommon StockPaid-In Capital in Excess of Par-Common StockPreferred StockRetained EarningsCash	Cash	Cash
	CashCommon StockPaid-In Capital in Excess of Par-Common StockPreferred StockRetained EarningsCommon Stock	Common Stock	Common Stock

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What is the company receiving and at what price is the stock being issued?

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Feb. 5. Issued 1,400 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.

Date	Account	Debit	Credit
Feb. 5	Common StockOrganizational ExpensesPaid-In Capital in Excess of Par-Common StockPreferred StockRetained EarningsOrganizational Expenses	Organizational Expenses	Organizational Expenses
	Common StockOrganizational ExpensesPaid-In Capital in Excess of Par-Common StockPreferred StockRetained EarningsCommon Stock	Common Stock	Common Stock

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Recall that stock may be issued for reasons other than to receive cash. What are these shares paying for?

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Apr. 9. Issued 60,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $200,000, $310,000, and $80,000, respectively.

Date	Account	Debit	Credit
Apr. 9	Common StockLandPaid-In Capital in Excess of Par-Common StockPaid-In Capital in Excess of Par-Preferred StockPreferred StockLand	Land	Land
	CashBuildingsCommon StockPaid-In Capital in Excess of Par-Common StockPreferred StockBuildings	Buildings	Buildings
	CashCommon StockEquipmentPaid-In Capital in Excess of Par-Common StockPaid-In Capital in Excess of Par-Preferred StockEquipment	Equipment	Equipment
	CashCommon StockEquipmentPaid-In Capital in Excess of Par-Preferred StockPreferred StockCommon Stock	Common Stock	Common Stock
	CashLandPaid-In Capital in Excess of Par-Common StockPaid-In Capital in Excess of Par-Preferred StockRetained EarningsPaid-In Capital in Excess of Par-Common Stock	Paid-In Capital in Excess of Par-Common Stock	Paid-In Capital in Excess of Par-Common Stock

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Record the assets, and increase the common stock account by the par value of the shares. Record any amount above par in a separate paid-in capital equity account.

Recall that shares of stock can be issued to acquire assets. At what value must the preferred stock and common stock accounts be recorded?

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June 14. Issued 32,000 shares of preferred stock at $82 for cash.

Date	Account	Debit	Credit
June 14	CashCommon StockPaid-In Capital in Excess of Par-Common StockPaid-In Capital in Excess of Par-Preferred StockPreferred StockRetained EarningsCash	Cash	Cash
	CashCommon StockPaid-In Capital in Excess of Par-Common StockPreferred StockRetained EarningsPreferred Stock	Preferred Stock	Preferred Stock
	CashCommon StockPaid-In Capital in Excess of Par-Common StockPaid-In Capital in Excess of Par-Preferred StockRetained EarningsPaid-In Capital in Excess of Par-Preferred Stock	Paid-In Capital in Excess of Par-Preferred Stock	Paid-In Capital in Excess of Par-Preferred Stock