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Practical Accounting Problems in Shareholders Equity

On December 31, 2019 Arndt Inc had stockholders equity of $380,000 comprising common stock of $90,000, share premium of $116,000 and retained earnings of $174,000. On March 31, 2020 Arndt declared a 10% stock dividend of 900 shares and had a net loss of $32,000 for the quarter. The balance of retained earnings on March 31, 2020 was $133,000. On July 1, 2020 Nall Co issued 2,500 shares of common stock and 5,000 shares of convertible preferred stock for $125,000. The common stock was trading at $24 per share and preferred stock at $18 per share. The amount allocated

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72 views1 page

Practical Accounting Problems in Shareholders Equity

On December 31, 2019 Arndt Inc had stockholders equity of $380,000 comprising common stock of $90,000, share premium of $116,000 and retained earnings of $174,000. On March 31, 2020 Arndt declared a 10% stock dividend of 900 shares and had a net loss of $32,000 for the quarter. The balance of retained earnings on March 31, 2020 was $133,000. On July 1, 2020 Nall Co issued 2,500 shares of common stock and 5,000 shares of convertible preferred stock for $125,000. The common stock was trading at $24 per share and preferred stock at $18 per share. The amount allocated

Uploaded by

Camille Bonagua
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Problem 1 (3 Points)

On December 31, 2019, the stockholders' equity section of Arndt, Inc., was as
follows:
Common stock, par value P10; authorized 30,000 shares; issued 90,000
and outstanding 9,000 shares
Share premium 116,000
Retained earnings 174,000
Total stockholders' equity 380,000

On March 31, 2020, Arndt declared a 10% stock dividend, and accordingly 900
additional shares were issued, when the fair market value of the stock was P18
per share. For the three months ended March 31, 2020, Arndt sustained a net
loss of P32, 000. The balance of Arndt’s retained earnings as of March 31,
2020, should be
A. 125,800
B. 133,000
C. 134,800
D. 142,000.

Problem 2 (3 Points)
On July 1, 2020, Nall Co. issued 2,500 shares of its P10 par common stock
and 5,000 shares of its P10 par convertible preferred stock for a lump sum of
P125, 000. At this date Nall's common stock was selling for P24 per share and
the convertible preferred stock for P18 per share. The amount of the proceeds
allocated to Nall's preferred stock should be
a. 62,500
b. 75,000
c. 90,000
d. 68,750

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