Answer The Following Questions In 1050 Words Using The Lachl

Answer the following questions in 1050 words using The Lachlincorpora

Answer the following questions in 1,050 words using the Lachlincorporated Balance Sheet located on p. 575 of Financial Accounting : How many shares of common stock are outstanding? Assuming there is a stated value, what is the stated value of the common stock? What is the par value of the preferred stock? If the annual dividend on preferred stock is $36,000, what is the dividend rate on preferred stock? If dividends of $72,000 were in arrears on preferred stock, what would be the balance reported for retained earnings? Use the Week 4 Excel® spreadsheet and submit with your answers.

Paper For Above instruction

The Lachlincorpora’s financial position as depicted on the balance sheet on page 575 of the “Financial Accounting” textbook provides an insightful base to analyze critical equity-related metrics such as the number of outstanding shares, valuation of stock classes, dividend rates, and retained earnings adjustments. This detailed analysis not only clarifies the company’s current financial standing but also demonstrates key principles of corporate finance related to equity securities.

Number of Shares of Common Stock Outstanding:

The first step in this analysis involves determining the total common shares outstanding. Typically, this information is explicitly stated on the balance sheet or in accompanying notes. For Lachlincorpora, the balance sheet reflects share capital details within the equity section. Assuming the balance sheet indicates the total amount of common stock issued and the stated or par value per share, the calculation for outstanding shares is straightforward: dividing the total common stock value by the per share value. If, for example, the common stock is reported as $500,000 with a stated value of $2 per share, then the outstanding shares are calculated as $500,000 divided by $2, which yields 250,000 shares. If the exact figures differ, substitute them accordingly to derive the precise number of shares. It is important to confirm whether all issued shares are outstanding or if any are treasury shares, which would necessitate further adjustments.

Stated Value of Common Stock:

The stated value (or sometimes called the stated or legal value) of common stock is an arbitrary value assigned by the corporation and appears on the balance sheet. It often serves a purpose similar to par value but can differ. If the balance sheet or notes specify a stated value, that value is directly used; otherwise, it may be inferred from the total common stock account divided by the number of shares issued. Suppose the balance sheet indicates the common stock account as $500,000, and the total issued shares are 250,000; the stated value per share would be $2. Again, verify whether the company explicitly states this or if there is other documentation clarifying the stated value.

Par Value of Preferred Stock:

Preferred stock often has a specified par value, which is typically indicated on the balance sheet or in the equity section. Par value represents the minimum legal capital that must be retained within the company and upon which dividends are often based. If the balance sheet specifies preferred stock with a par value of, say, $1 per share, and if there are 50,000 preferred shares issued, then the total preferred stock capital would be $50,000. To find the per-share par value precisely, check the notes accompanying the financial statements or the equity section where preferred stock details are tabulated.

Dividend Rate on Preferred Stock:

The dividend rate on preferred stock is calculated based on the annual dividend and the preferred stock’s par value. Given that the annual dividend is $36,000, and assuming the preferred stock’s par value is $1 per share with 50,000 shares issued, the dividend rate is computed as: (Annual dividend / Total par value of preferred stock) × 100%.

Using the assumptions:

Dividend rate = ($36,000 / $50,000) × 100% = 72%.

This indicates that the preferred stockholders are receiving dividends amounting to 72% of their investment’s par value annually. If actual figures differ, substitute with the real data from the balance sheet.

Retained Earnings Considering Dividends in Arrears:

If dividends of $72,000 are in arrears on preferred stock, this affects the retained earnings balance. Dividends in arrears signify that preferred stockholders have not received dividends owed to them, which reduces the distributable earnings available to common shareholders, and would be reported in the equity section or notes but does not directly alter the retained earnings balance unless the arrears are declared and accumulated formally through a journal entry.

In the context of this question, the critical aspect is understanding that arrears on preferred dividends do not directly change the retained earnings figure reported at year-end unless dividends are formally declared as unpaid, which then reduces retained earnings. If the balance sheet reports retained earnings of, say, $250,000 prior to considering arrears, then the accumulated arrears would be disclosed separately or in the notes, not deducted directly from retained earnings unless the arrears are recognized as dividends payable that are overdue.

In summary, to resolve these queries utilizing Lachlincorpora’s balance sheet, one must analyze the specific figures reported in the equity section, coupled with the notes detailing stock classes and dividend policies. These computations provide significant insights into the company’s financial health, investor return expectations, and dividend policies.

References

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