Question 1: Common and preferred stock issuances and dividends Permabilt Corp. was incorporated on January 1, 2013, and issued the following stock for cash:
4,000,000 shares of no-par common stock were authorized; 1,250,000 shares were issued on January 1, 2013, at $35 per share.
1,500,000 shares of $100 par value, 8.5% cumulative, preferred stock were authorized, and 640,000 shares were issued on January 1, 2013, at $105 per share.
Net income for the years ended December 31, 2013, 2014, and 2015, was $18,400,000, $24,600,000, and $28,750,000, respectively.
No dividends were declared or paid during 2013 or 2014. However, on December 17, 2015, the board of directors of Permabilt Corp. declared dividends of $42,300,000, payable on February 9, 2016, to holders of record as of January 4, 2016.
Required:
a. Use the horizontal model (or write the entry) to show the effects of
1. The issuance of common stock and preferred stock on January 1, 2013.
2. The declaration of dividends on December 17, 2015.
3. The payment of dividends on February 9, 2016.
b. Of the total amount of dividends declared during 2015, how much will be received by preferred shareholders?
Question 2: Treasury stock transactions On January 1, 2013, Metco, Inc., reported 622,100 shares of $3 par value common stock as being issued and outstanding. On March 15, 2013, Metco, Inc., purchased for its treasury 5,200 shares of its common stock at a price of $64 per share. On August 10, 2013, 1,900 of these treasury shares were sold for $76 per share. Metco s directors declared cash dividends of $2.10 per share during the second quarter and again during the fourth quarter, payable on June 30, 2013, and December 31, 2013, respectively. A 3% stock dividend was issued at the end of the year. There were no other transactions affecting common stock during the year.
Required:
a. Use the horizontal model (or write the entry) to show the effect of the treasury stock purchase on March 15, 2013.
b. Calculate the total amount of the cash dividends paid in the second quarter.
c. Use the horizontal model (or write the entry) to show the effect of the sale of the treasury stock on August 10, 2013.
d. Calculate the total amount of cash dividends paid in the fourth quarter.
e. Calculate the number of shares of stock issued in the stock dividend.