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Exercise 11-13

Korsak Corporation decided to issue common stock and used the $263,700 proceeds to redeem all of its outstanding bonds on January 1, 2014. The following information is available for the company for 2013 and 2014.

2014 2013 Net income $ 195,800 $ 141,000 Dividends declared for preferred stockholders 6,500 6,900 Average common stockholders'equity 1,158,400 896,800 Totaf assets t,462,5OO 1,382,900 Current liabilities 256,800 200,600 Total liabilities 3A4,7OO 486,700

Compute the retum on common stqckholders'equity for both years. (Round answers to I decimal place, e.g. l2,iqo,)

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The return on comrnon stockholders'equity ratio

Cornpute the debt to total assets ratio for both years. (Round answers to 7 decimal place, e.g. 72.5Vo.)

2014 2013 The debt to total assets ratio

Exercise 11.{ The stockholderc'equity section of Leyland Corporation's balance sheet at December 31 is presented here.

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Stockholders' equity Paid-in capital

Pre$erred stock, cumulative, 12,500 shares authorized, 7,500 shares issued and g 765,000 outstanding

Common stock, no Wr,772,t12 shares authorized, 597,100 shares issued 1,791,300 Total paid-in apital 2,556340 Retained eamings 1,158,000 Total paid-in capital and retained earnings 3,7t430A Less: Treasury stock (6,550 common shares) (31,933 )

Total stockholders'equity $3,679367

From a review of the stockholders'equity sectlon, answer the following questions.

(a) How many shares of common stock are outstanding?

Common stock outstanding shares

(b) Assuming there is a stated value. what is the stated value of the common stock?

The stated value of the common stock ^-'--- $ per share

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(c) What is the par value of the preferred stock?

Theparvalueofthepreferredstock $ pershare

(d) If the annual dividend on peferred stock is $53,550, what is the dividend rate on preferred stock?

The dividend rate

(e) If dividends of $7l,7OO were in affears on preferred stock, what would be the balance r€ported for retained eamings?

The Retained Earnings balance *

Exercise 1l-7 On October 3 1, the stockholders' equity section of Pele Company's balance sheet consists of common stock $519,000 and retained earnings $448,900.

Pele is considering the following two courses of action:

(1) Declarlng a 796 stock dividend on the 86,500 $6 par value shares outstanding (2) Effecting a 2-for-1 stock split that will reduce par value to $3 per share.

The current market price is $16 per share.

Prepare Et tabular summary of the effects of the alternative actions on the company's stockholders' equity and outstanding shares.

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Bcforq Action A+r Stock Dividond Afhr Sbck 9plit Stockholders' eguity

Paid-in capital

Retained earnings

Total stockholders' equity

Outstanding shares

Exercise ll-9 The following stockholders'equity accounts, aranged alphabetically, are in the ledger of Roder Corporation at December 31,20L4.

C-ommon Stock ($3 stated value) $2,192,000 Paid-in Capital in Excess of Par Value-Prefered Stock 61,650 Paid-in Capital in Excess of Stated Value-Common Stock 1,438,500 Preferred Stock (60/o, $100 par, noncumulative) 822,000 Retained Earnings 1,827,580 Treasury Stock (16,440 common shares) 98,640

Prepare the stockholders'equity section of the balance sheet at December 3L,20L4.

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