Reference no: EM132499808

Various Topics Related to Common and Preferred Shares:

Issuance of Shares: Trojan Company issued 50,000 $10 par value common shares for $850,000 cash early in Year 1. At the same time the firm issued 5,000 $50 par value 7% preferred shares in exchange for equipment worth $270,000. The preferred shares are participating and cumulative. In Year 1, Trojan had Net Income of $830,000.

• On January 1, Year 2, the firm issued a 28% common stock dividend when the shares had a fair market value of $34 per share. $10,000 of cash dividends were declared and paid in Year 2. During Year 2, the firm had Net Income of $550,000.

Required:

Question 1: Determine proper values for these accounts at the end of Year 2:

Common Stock: $______________

Retained Earnings $_____________

Dividends in Arrears $___________

• Early in Year 3, Trojan distributed a 10% common stock dividend when the fair market value of the common shares was $25 each. Net Income in Year 3 was $850,000. The firm declared and distributed a cash dividend in November Year 3 in the amount of $360,000.

Required:

Question 2: Determine the proper values for these things based on the information provided:

Retained Earnings balance at December 31, Year 3 $_____________

Cash paid to common shareholders in Year 3: $_____________

Balance in Common Stock account at December 31, Year 3: $_____________

• On January 1, Year 4, Trojan declared and distributed a '4 for 1' common stock split when the fair market value of each common share was $30. Cash dividends declared and distributed late in Year 4 amounted to $260,000. Net Income for Year 4 was $820,000.

Required:

Question 3: Determine the proper values for these things based on the information provided:

Retained Earnings balance at December 31, Year 4 $_____________

Cash paid to preferred shareholders in Year 4: $_____________

Balance in Common Stock account at December 31, Year 4: