AFM121 Lecture Notes - Lecture 8: Dividend Tax, Stock Split, Market Capitalization

50 views3 pages

azureturtle555

7 Apr 2017

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM121

Professor

Steve Balaban

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Chapter 8 equity securities: common and preferred shares. Common shares p(cid:396)o(cid:448)ide p(cid:396)opo(cid:396)tio(cid:374)ate o(cid:449)(cid:374)e(cid:396)ship i(cid:374) the (cid:272)o(cid:373)pa(cid:374)y"s e(cid:395)uity (cid:448)alue, the (cid:448)alue of (cid:449)hi(cid:272)h (cid:449)ill (cid:272)ha(cid:374)ge i(cid:374) (cid:396)espo(cid:374)se to (cid:272)ha(cid:374)ges i(cid:374) the (cid:448)alue of the fi(cid:396)(cid:373)"s e(cid:395)uity and the (cid:374)u(cid:373)(cid:271)e(cid:396) of shares outstanding. Preferred shares provides the owner with a claim to a fixed amount of equity that is established with the share is first issued. More attractive to investors who want a steady income and secure position. O(cid:373)eti(cid:373)es (cid:396)efe(cid:396)(cid:396)ed to as (cid:862)(cid:396)isk (cid:272)apital(cid:863) to (cid:396)efle(cid:272)t the possi(cid:271)ly of total loss of i(cid:374)vestment if the issuer fails. If the stock is 2 for 1, the share price is halved. If a company has 100 million shares for each, a 2 for 1 stock split will result in 200 million shares for each. **a stock split does not increase a company"s market capitalization** increased), it makes sense that the value of a company does not increase.

Related Questions

Hatch Company has two classes of capital stock outstanding: 7%, $20 par preferred and $5 par common. At December 31, 2014, the following accounts were included in stockholdersâ equity. Preferred Stock, 152,300 shares $ 3,046,000 Common Stock, 2,127,000 shares 10,635,000 Paid-in Capital in Excess of ParâPreferred Stock 209,700 Paid-in Capital in Excess of ParâCommon Stock 27,420,000 Retained Earnings 4,544,000 The following transactions affected stockholdersâ equity during 2015. Jan. 1 39,900 shares of preferred stock issued at $23 per share. Feb. 1 53,400 shares of common stock issued at $21 per share. June 1 2-for-1 stock split (par value reduced to $2.50). July 1 32,000 shares of common treasury stock purchased at $10 per share. Hatch uses the cost method. Sept. 15 10,200 shares of treasury stock reissued at $12 per share. Dec. 31 The preferred dividend is declared, and a common dividend of 55Â¢ per share is declared. Dec. 31 Net income is $2,182,000.

Problem 15-3

Hatch Company has two classes of capital stock outstanding: 7%,$20 par preferred and $5 par common. At December 31, 2014, thefollowing accounts were iHatch Company has two classes of capitalstock outstanding: 7%, $20 par preferred and $5 par common. AtDecember 31, 2014, the following accounts were included instockholdersâ equity.

Preferred Stock, 151,800 shares		$ 3,036,000
Common Stock, 2,120,000 shares		10,600,000
Paid-in Capital in Excess of ParâPreferred Stock		203,700
Paid-in Capital in Excess of ParâCommon Stock		27,240,000
Retained Earnings		4,547,000

The following transactions affected stockholdersâ equity during2015.

Jan. 1		40,300 shares of preferred stock issued at $22 per share.
Feb. 1		53,500 shares of common stock issued at $21 per share.
June 1		2-for-1 stock split (par value reduced to $2.50).
July 1		39,700 shares of common treasury stock purchased at $9 pershare. Hatch uses the cost method.
Sept. 15		10,600 shares of treasury stock reissued at $11 per share.
Dec. 31		The preferred dividend is declared, and a common dividend of55Â¢ per share is declared.
Dec. 31		Net income is $2,279,000.

Prepare the stockholdersâ equity section for Hatch Company atDecember 31, 2015.

apricothornet191

The stockholders' equity section of Gupta Company at December 31, 2013 follows:

8% preferred stock, $25 par value, 50,000 shares authorized; 7,200 shares issued and outstanding....... $180,000

Common Stock, $10 par value, 200,000 shares authorized; 40,000 shares issued and outstanding..... $400,000

Paid-In capital excess of par value (preferred)......... $68,000

Pain-IN capital in excess par value (common).... $200,000

Retained Earnings... $280,000

During 2014, the following transactions ocurred:

Jan 10 Issued 28,000 shares of common stock for $16 per share

Jan 23 Repurchased 8,000 shares of common stock at $18 per share

Mar 14 Sold half of the treasury shares acquired Jan 23 for $20 per share

July 15 Issued 2,800 shares of preferred stock for $128,000 cash

Nov 15 Sold 1,000 of the treasury shares acquired Jan 23 for $24 per share

Questions:

a0 Use the financial statement effects template to indicate the effects from cash of these transactions.

b) Prepare the December 31, 2014, stockholders' equity section of the balance sheet assuming the company reports 2014 net income of $62,000.

sangriacattle788

AFM121 Lecture Notes - Lecture 8: Dividend Tax, Stock Split, Market Capitalization

Document Summary

Get access

Related Documents

AFM121 Chapter Notes - Chapter 8: Open Market Operation, S&P 500 Index, Sinking Fund

AFM121 Chapter Notes - Chapter 8-9: Cac 40, Uptodate, Dow Jones Industrial Average

AFM121 Chapter Notes - Chapter 8: Dividend Payout Ratio, Dividend Policy, Savings Account

Related Questions