【文章內(nèi)容簡介】 d outstanding 1,3391032 (20 min.) See Exhibit 1032 on the following page.419Chapter 10 Stockholders’ EquityEXHIBIT 1032Liquidation of Claims Under Various Alternatives(In Thousands) Total Cash Proceeds to be Distributed Account Balances $1,400 $1,100 $800 $600 $400 $200Accounts payable $ 300 $ 300 $ 300 $300 $300 $240* $120*Unsubordinated debentures 200 200 200 200 200 160* 80*Subordinated debentures 300 300 300 300 100Preferred stock ($20 par value and $24 liquidating value per share) 100 120 120 Common stock and retained earnings 300 480 180Total liabilities and shareholders’ equity $1,200 Total cash proceeds distributed $1,400 $1,100 $800 $600 $400 $200* Ratio of 60:40 because of claims of $300,000 and $200,000, respectively.1033 (5–10 min.) Amounts are in millions of yen.1. Issue price = 165。158,611 247。 1, shares = 165。 Cash 158,611 Common stock 103,517 Capital surplus 55,094 To account for 165。62 par value shares issued at 165。95 per share: 165。62 1, = 165。103,517 And (165。 – 165。62) 1, = 165。55,0942. In the United States, par value is usually small in relation to the issue price of mon shares. For Kawasaki Heavy Industries, the par value is 165。62 247。 165。 = 65% of the issue price. 1034 (15–20 min.)1. Preferred Dividends Common Dividends Net Ine Declared In Arrears Declared 20X1 $(5,000,000) – $5,000,000 – 20X2 (4,000,000) – 10,000,000 – 20X3 15,000,000 $ 6,000,000** 9,000,000* – 20X4 20,000,000 14,000,000*** – $6,000,000*** 20X5 14,000,000 5,000,000 – 9,000,000 Total $40,000,000 $25,000,000 $15,000,000 * $5 million per year times 3 years, less $6 million paid in 20X3. ** Available to declare = $(5) + $(4) + $15 = $6 million. All goes to preferred.*** Available to declare = $20 million, preferred receives $9 million arrearage plus $5 million for 20X4, balance to mon.The board of directors is not legally obligated to declare dividends at any time. Whether these amounts would be declared and paid at the indicated times would depend on the cash position, liabilities, and general financial plans. Indeed, the likelihood of these large dividends being paid so soon is small. Nonetheless, as long as the balance of retained earnings is positive, in most states, the board could legally declare dividends that would decrease the balance to zero.Holders of cumulative stock would receive accumulated dividends before the holders of mon shares received any dividends. Failure to pay dividends at the specific dates results in arrearages, which is a word monly used to describe accumulated unpaid preferred dividends. The amount of dividends in arrears is not a liability. Why? Because no dividends are liabilities until declared.2. Net IneDividends Declared Preferred Common19X1$(5,000,000)––19X2(4,000,000)––19X315,000,000$5,000,000 $1,000,00019X420,000,0005,000,000 15,000,00019X5 14,000,000 5,000,000 9,000,000$40,000,000$15,000,000$25,000,000If the preferred is not cumulative, preferred shareholders get only $15,000,000 pared to $25,000,000 otherwise.1035 (5–10 min.) This preferred stock is cumulative, so all missed preferred stock dividends must be paid before paying any mon stock dividends. Preferred dividends for 20X1, 20X2, and 20X3 are: .07 $3,000,000 3 = $630,000 After paying $630,000 in preferred dividends, $370,000 is left for mon stock dividends: $1,000,000 – $630,000 = $370,0001036 (10 min.) Amounts are in millions of yen.Amount of dividends: 1, million 165。77 = 165。139,724 millionDeclaration: Dividends declared 139,724 Dividends payable 139,724 To record dividends of 165。77 per share.Payment: Dividends payable 139,724 Cash 139,724 To record payment of cash dividends.1037 (10 min.) Cash 80,000 Common stock 8,000 Additional paidin capital 72,000 To record issue of 4,000 shares upon exercise of options to acquire them @ $20 per share. The managers have options on stock that has a value of 4,000 $40 = $160,000. The gain is $80,000, since they must pay $80,000 to acquire the shares. This substantial economic benefit results from a significant rise in the stock price over 3 years. Proponents of stock options would say that managers had worked hard at the pany and being rewarded appropriately for the benefits the pany had experienced. Critics would ask whether the whole economy and the stock market had doubled during these 3 years and, if so, would argue that managers had benefited from that general improvement.1038 (15 min.) Because the par value of the stock increased by 50%, from $8,802,000 to $13,203,000, Dean Foods had a 3for2 stock split or a 50% stock dividend. The classic idea of a stock split has been to issue a number of shares in exchange for each share of stock now outstanding. Thus a 3for2 split of a $30par stock would mean that a shareholder would receive three $20par shares for each two $30par shares exchanged. This entails no formal change in the total dollar balance of mon stock. As a practical matter, panies often acplish such a split via a 50% “stock dividend.” Dean Foods used the 50% stock dividend device, thereby automatically issuing one additional share for each two shares outstanding. This necessitated charging retained earnings at par for the total additional shares issued because the par value was not reduced as it often is for a stock split. This way of obtaining a split has a great attraction because it does not involve the bother and expense of exchanging certificates. “Stock dividends” of 25% or more are essentially stock splits and should be accounted for as such. However, even though