Subject: Financial Accounting Principles

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Q NO 4 (7)

The year-end balance sheet of Social Systems, Inc. includes the following stockholders equity section (with certain details omitted):

Stockholders equity:

8% cumulative preferred stock, $100 par value,

callable at $104, 100,000 shares authorized................................................. $3,200,000

Common stock, $3 par value, 1,000,000 shares

authorized................................................................................................. 1,200,000

Additional paid-in capital: Common stock........................................................ 2,800,000

Donated capital............................................................................................... 610,000

Retained earnings............................................................................................ 3,470,000

Total stockholders equity....................................................................... $11,280,000

Instructions

From this information, compute answers to the following questions:

1. How many shares of preferred stock have been issued?
2. What is the total amount of the annual dividends paid to preferred stockholders?
3. How many shares of common stock are outstanding?
4. What was the average issuance price per share of common stock?
5. What is the amount of legal capital?
6. What is the total amount of paid-in capital?
7. What is the book value per share of common stock? (There are no dividends in arrears.)
8. Assume that retained earnings at the beginning of the year amounted to $815,000 and the net income for the year was $4,200,000. What was the dividend declared during the year on each share of common stock? (Hint: Net income increases retained earnings, whereas dividends decrease retained earnings.)