Question 1
Below is the stockholders' equity section of Mission Company. Use this information to answer the following questions. Show all work.
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Preferred stock (6% Cumulative, $50 par, 15,000 shares authorized, 10,000 shares issued and outstanding)
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$500,000
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Additional paid-in capital - preferred
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100,000
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Common stock ($20 par, 100,000 shares authorized,
___shares issued and ____shares outstanding)
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1,400,000
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Additional paid-in capital- common
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700,000
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Retained earnings
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500,000
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Subtotal
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$3,200,000
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Less: Treasury stock (2,000 common shares at cost)
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( 50,000)
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Total stockholders' equity
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$3,150,000
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1. How many shares of common stock have been issued?
2. How much was received when the common stock was issued?
3. How many shares of common stock are outstanding?
4. What is the current year's dividend stipulated for the preferred shareholders?
5. Assume dividends are in arrears for the two preceding years.
How much would have to be paid to preferred shareholders before any dividends are paid to common shareholders?
6. What is the cost per share of the treasury stock?
7. U.S. companies cannot recognize gains and losses on Treasury Stock transactions in their Income Statements.
True or False (Circle one.)
Question 2
Moonlight Corporation prepared the following Income Statement and Balance Sheet for the year ended December 31, 2016.
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Moonlight Corporation
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Income Statement
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Year Ended Dec 31, 2016
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Sales Revenue
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17,500
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Cost of Goods Sold
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7,800
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---------------
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Gross Margin
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9,700
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Wage Expense
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1,000
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Selling and Administrative Expenses
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4,500
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Depreciation Expense
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700
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--------------
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6,200
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---------------
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Income from operations
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3,500
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Other Income/(Expenses)
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Interest Expense
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(900)
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Gain on sale of land
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120
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--------------
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(780)
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---------------
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Pretax Income
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2,720
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Income Tax
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1,000
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---------------
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Net Income
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1,720
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=========
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Balance Sheet as of
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12/31/16
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12/31/15
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Increase
(Decrease)
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Assets
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Current Assets
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Cash
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480
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420
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60
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Accounts Receivable
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4,974
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3,900
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1,074
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Inventory
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4,551
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4,500
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51
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Prepaid Assets
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930
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908
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22
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Total Current Assets
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10,935
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9,728
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1,207
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Land
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0
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5,000
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(5,000)
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Property, Plant & Equipment (cost)
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11,000
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11,000
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0
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Less: Accumulated Depreciation
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(5,900)
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(5,200)
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(700)
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Total Assets
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16,035
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20,528
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(4,493)
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Liabilities and Owners' Equity
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Current Liabilities
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Accounts Payable
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5,102
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5,140
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(38)
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Wages Payable
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2,940
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2,890
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50
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Dividends Payable
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110
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100
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10
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Total Current Liabilities
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8,152
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8,130
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22
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Long term debt
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1,913
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7,588
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(5,675)
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Stockholders' Equity
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Common Stock
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4,010
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4,010
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Retained Earnings
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1,960
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800
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1,160
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Total Liabilities and Owners' Equity
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16,035
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20,528
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(4,493)
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The following additional data are available:
(a) Land that originally cost $ 5,000 was sold for cash $5120;
(b) Cash dividends declared in 2016 were $560. The company has paid $550 in cash with the remaining $10 to be paid next year.
(c) During the year, paid back long-term debt of $ 5,675 with cash.
Required:
Prepare the Statement of Cash Flows for the year ended December 31, 2016 using the indirect method.