Serial Problem: Kates Cards Chapter 11
SERIAL PROBLEM: KATE'S CARDS Note: This is a continuation of the Serial Problem: Kate's Cards from Chapters I throu SPI. Kate's business continues to flourish. It hardly seems that just eleven months through 10.) Js that she or copyright infringenmen Kate s Cards ago, in 2015, that Kate started the business. She is especially pleased that she was able fend herself against what turned out to be a mistaken attempt to sue hecceor r for copyright innu e She was able to clearly demonstrate that her card designs were unique and signici Kate has decided to take on an investor. Taylor Kasey believes that Kate's Card good investment and wishes to invest money to help Kate expand the business. somewhat unsure how to structure Taylor's investment. Taylor wishes to be an than simply providing a loan to Kate. Kate wants to know whether she should i stock or preferred stock for her investment. from the designs sold by Mega Cards. Kate, however,i equity investor issue Taylor co difference between the two classes of stock and suggest which t type is more ap 1. Discuss the propriate for Kate to issue. Kate has decided that she does not want to give up voting control of Kate's Cards, nce T div aylor prefers to be a passive investor, but does wish to have a steady income from decision is made to issue 50 shares of $100 par value,6 percent cumulative preferred Provide the journal entry to record the issuance of the preferred stock for c 3. Kate also wishes to pay dividends on both her common shares and the preferred stock. She 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? 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 dividendsthat 4. 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. Chapter 11 Stockholders Equity Kate's Cards has a net income of $1,500 for the current month of August 2016. 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 ao like to see a monthly statement of retained earnings for August 2016. In addition, she would like to see how the stockholders' equity section of the balance sheet will look after the addition of the s referred stock. The stockholders' equity section from July 2016 is shown below: Stockholders' Equity Common stock (5,000 shares authorized, 500 shares issued and outstanding) $500 9,500 15,000 $25,000 Total stockholders' equity .. Prepare a statement of retained earnings for the month of August 2016 and the stockholders' equity section of the balance sheet as of August 31, 2016
