Alpha Corporations Has 1500 Shares Of $40 Par 7% Cumulative

Alpha Corporations Has 1500 Shares Of 40 Par 7 Cumulative Preferr

Alpha Corporation's has 1,500 shares of $40 par, 7% cumulative preferred stock and 2,200 shares of $10 par common stock. Alpha paid $10,000 in cash dividends including one-year dividends in arrears to preferred stockholders. Common stockholders will receive: A. $0. B. $1,600. C. $220. D. $5,800.

Rhubarb Corporation’s outstanding stock is 100 shares of $100, 11% cumulative nonparticipating preferred stock, and 2,000 shares of $12 par value common stock. Rhubarb paid $1,600 cash dividends during the year. Common stockholders received __________. A. $0 B. $500 C. $2,500 D. $1,100.

Soy.com has 100 shares of $100, 6% cumulative nonparticipating preferred stock, and 1,000 shares of $10 par value common stock outstanding. The company paid $2,000 cash dividends, including one-year dividends in arrears to preferred stockholders. Preferred stockholders received A. $1,200. B. $2,000. C. $182. D. $600.

Which of the following would normally not appear in the Stockholders’ Equity section of the balance sheet? A. Cash B. Paid-In Capital C. Common Stock D. Preferred Stock.

In Exchange for $1,500 legal services to help set up the new company, Hickory Grove Corporation issued 100 shares of $10 par value stock to its attorney. The entry to record the issuance of the stock would include a A. credit to Common Stock for $1,000. B. debit to Common Stock for $1,000. C. credit to Common Stock for $1,500. D. debit to Paid-In Capital in Excess of Par Value for $500.

The entry to record MidIowa.net’s selling 800 shares of $6.00 par value common stock at $8.00 would be to: A. Debit Cash $6,400; credit Common Stock $4,800; credit Paid-In Capital in Excess of Par Value—Common $1,600 B. Debit Cash $4,800; credit Common Stock $4,800 C. Debit Cash $6,400; debit Paid-In Capital in Excess of Par Value—Common $1,600; credit Common Stock $8,000 D. None of the above.

ABC sells 400 shares of its $23 par common stock for $27. The entry would entail credit(s) to A. Cash for $9,200. B. Paid-In Capital in Excess of Par—Common for $800 and Common Stock for $10,800. C. Paid-In Capital in Excess of Par—Common for $1,600 and Common Stock for $9,200. D. Common Stock for $10,800.

Paper For Above instruction

The given set of problems revolves around the essential concepts of stockholder equity accounting, specifically focusing on dividends, stock issuance, and the structure of stockholder equity on the balance sheet. A comprehensive analysis of each problem offers insight into corporate financial practices concerning preferred and common stock, dividend allocation, and journal entries that reflect transactions involving stock issuance and dividend distribution.

Dividends to Preferred and Common Stockholders

In the case of Alpha Corporation, which has 1,500 shares of $40 par, 7% cumulative preferred stock, and 2,200 shares of $10 par common stock, the company's total dividend payout of $10,000 must be apportioned based on the priority of claims. The preferred stock's dividend obligation is 7% of the par value per share, which totals $4,200 (1,500 shares × $40 × 7%). Since the preferred stock is cumulative, any arrears in dividends must be paid before common stockholders receive any dividends. Given that they are paid $10,000, which exceeds the preferred dividend need, the preferred stockholders are fully paid, including arrears, and the remaining amount of $5,800 ($10,000 - $4,200) is allocated to common stockholders, resulting in a payout of $2.636 per common share ($5,800 ÷ 2,200 shares), which is approximately $220.

Similarly, for Rhubarb Corporation, with 100 shares of $100, 11% cumulative nonparticipating preferred stock and 2,000 shares of $12 par common stock, a $1,600 dividend payout is considered. The preferred dividend obligation is $11,000 (100 shares × $100 × 11%). Since the total dividends paid are only $1,600, the preferred shareholders receive their entire dividend amount because dividends are allocated on a priority basis. The preferred investors are entitled to their full $11 per share, amounting to $1,100. Therefore, the common stockholders receive nothing, hence option A aligns with this distribution.

Impact of Dividend Payments on Stockholders’ Equity

The question about which item would normally not appear in the stockholders’ equity section highlights the importance of understanding the components of the equity section of a balance sheet. Cash, as a current asset, does not appear in stockholders’ equity. The typical components of stockholders’ equity include Paid-In Capital, Common Stock, and Preferred Stock. They represent investments made by shareholders and retained earnings, which are shown on the balance sheet’s equity section.

Stock Issuance and Journal Entries

Regarding the issuance of stock in exchange for legal services valued at $1,500, the proper journal entry involves recognizing the stock issued at its par value and recording any additional amount as additional paid-in capital. For 100 shares at $10 par, the credit to Common Stock is $1,000, and the remaining $500 would be credited to Paid-In Capital in Excess of Par, reflecting the total value assigned to the services rendered.

In the sale of 800 shares of $6 par stock at $8 per share, the total cash received is $6,400. The Common Stock account is credited by the total par value of $4,800 (800 × $6), and the excess over par, amounting to $1,600, is credited to Paid-In Capital in Excess of Par. These entries accurately capture the increase in stockholders’ equity resulting from issuance at a premium over par value.

Stock Price and Equity Registration

For a sale of 400 shares at $27 per share, with a $23 par value, the journal entry incorporates a debit to Cash for $10,800 (400 × $27). The credit to Common Stock is $9,200 (400 × $23), representing the basic stock equity at par. The remaining amount, $1,600, is credited to Paid-In Capital in Excess of Par, which captures the premium over the par value paid by investors.

Conclusion

These financial transactions exemplify fundamental principles in stockholder equity accounting, showing how dividends, stock issuance, and paid-in capital are recorded and reported. Proper understanding of these principles ensures accurate financial reporting and compliance with accounting standards. Recognizing the precedence of dividend payment to preferred over common shareholders, the correct journal entries for stock issuance, and the components of stockholders’ equity are essential skills for accounting professionals and financial analysts.

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