【正文】 s 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。139,724 millionDeclaration: Dividends declared 139,724 Dividends payable 139,724 To record dividends of 165。 1,500= 58,0052. Common Stock, Paidin Capital, and Retained Earnings will be decreased by $.01 1,500 = 15。 and ($ – $25) 1,500 = 20,505。 Number of mon shares outstanding = ($118 $15) 247。 Average mon equity = [$12 – (8% $15)] 247。 [($112 – $15) + ($118 – $15)] = $ 247。 189。 189。 $14,800 = %Earnings per share of mon stock = (Net ine – Preferred dividends) 247。 4,000 = $.50Priceearnings ratio = Market price per share of mon stock 247。 $.50 = 22Dividendpayout ratio = Common dividends per share 247。 $.50 = 40% Dividendyield ratio = Common dividends per share 247。 $ = %Book value per share of mon stock = (Stockholders’ equity – Liquidating value of preferred stock) Number of mon shares outstanding= ($20,000 – $4,400) 247。 $ 50 Number of shares 4,960,000 2. These automatic plans save brokerage fees and are a convenient way for a pany to raise additional capital. The letter writer misses the point. The shareholder can have cash if desired (unlike stock dividends). Therefore, the amount is justifiably subject to personal ine taxes because the cash is “constructively received.” Different corporations are at different stages in their growth cycles. Investors who do not desire dividends may prefer to invest in growth stocks that do not pay dividends. These investors can meet their periodic needs for cash by selling shares.1048 (10 min.)1. The logical reasons would typically be historical, tax based, or related to access to capital. Sometimes they are linked to voting rights, as with Ford Motor Company where historical family holdings carry super voting rights. That is not the case with Shell. The different classes are an historical result of the 1907 merger of a Dutch pany with a . pany. A historically plex structure was simplified in 2004 but the differential payment currencies continue. The . ADR structure is a longstanding . mechanism for providing access to international panies, but it is not about how panies issue stock. Rather is represents a mechanism for making international panies available to . shareholders via a trust mechanism that holds class A or B shares and issues ADR’s. 2. Shell publishes its financial statements in . dollars because that is the international currency in which oil transactions are priced. 1049 (20–30 min.)1. Cash 10,000,000 Common stock 1,600,000 Additional paidin capital 8,400,000 To record the issuance of 400,000 shares of $4 par value for an average price of $25 per share.2. Retained earnings 400,000 Cash 400,000 To record the declaration and payment of cash dividends of $1 per share on March 31, 20X2.3. Retained earnings 1,000,000 Common stock 80,000 Additional paidin capital 920,000 To record a 5% mon stock dividend, resulting in the issuance of 20,000 shares. Retained earnings is reduced at the rate of the market value of $50 per share at date of issuance. Before 5% After 5% Stock Stock Dividend Changes DividendCommon stock, 400,000 $ 1,600,000 + (20,000 shares $ 1,680,000 shares $4par $4 par) = +80,000Additional paidin capital 8,400,000 + [20,000 shares 9,320,000 ($50 – $4)] = +920,000Retained earnings 9,000,000 – (20,000 $50) 8,000,000 = –1,000,000Stockholders’ equity $19,000,000 $19,000,000Overall market value of stock assumed $50 $20,000,000 assumed $* $20,000,000*Total shares outstanding 400,000 420,000Individual shareholder: Assumed ownership of shares 5,000 5,250 Percentage ownership interest % Still %* Many simultaneous events affect the level of stock prices, including expectations regarding the general economy, the industry, and the specific pany. Thus, the market price of a stock may move in either direction when a stock dividend is declared. Theory and plicated case studies indicate that a stock dividend should, on average, have zero effect on the total market value of the firm. Accordingly, the new market price per share should be $20,000,000 247。 if they sell their dividend shares, their proportionate ownership interests in the pany will decrease.Second, the pany records the transaction by transferring the market value of the additional shares from retained earnings to mon stock and “paidin capital in excess of par.” This entry is often referred to as the “capitalization of retained earnings.”4. Investment in mon stock of Minneapolis Co. 125,000 Cash 125,000 To record investment in 5,000 shares of an original issue of Minneapol