1. FGL board of director probably repurchased companys shares to: -Increase earnings per share by reducing number of shares outstanding -Increase price per share by reducing common shares outstanding -Fund operations due to lacking investment opportunities -Plan to issue additional shares to management due to stock options -Maintain/strengthen management control of companys operations and other activities 2. Date Account Debit Credit Feb 1 2009 Class A shares 31,063,000 Retained Earnings 12,964,000 Cash 44,027,000 Repurchase of 2,694,376 common shares at $16.34 each 3. $147,161 / 30,468 Weighted Average Price per Share: $4.83 Ever since the company sold its shares, its price per share has increased. This increase indicates that the company is engaging in profitable operations and retains earnings used for investment into business. 4. Total number of dividends declared and paid is reduced, because total shares outstanding is smaller now.
AP 12-3
1. Date Account Debit Credit Mar 10, 2011 Building 1,000,000 Preferred Shares 700,000 Common Shares 300,000 July 1, 2011 Dividend Declared Preferred Shares (6,000 x 2) + (6,000+14,000) x 2)
52,000 Dividend Declared Common Shares (250,000 + 15,000) x 0.5 132,500 Dividend Payable-Preferred 52,000 Dividend Payable-Common 132,500 Aug 1, 2011 Dividend Payable-Preferred 6,000 x 2 = 12,000 (preferred) 52,000 Dividend Payable-Common 132,500 Cash 184,500 Dec 31, 2011 Income Summary 385,000 Retained Earnings 385,000 Simon Hua 37846136 COMM 293- SINCLAIR
2.
Preferred share: 300,000 + 700,000 Common share: 500,000 + 300,000
Freeman Inc Shareholders Equity For the Year Ending December 31, 2011 (In $ CAD) Shareholders Equity Share Capital Preferred shares, $2, cumulative, outstanding $1,000,000 20,000 shares Common shares, outstanding 265,000 shares 800,000 Retained Earnings 800,500 Total shareholders equity $2,600,500
AP 12-4
Case A:
Total Cash Dividends:
25,000
Total Preferred Dividends (2011): (16,800)
Total Common Dividends: 8,200
($16,800 / 8,400) Dividend Per Preferred Share: $2 (8,400 x $2) Total Dividends for Preferred Shares: $16,800 ($25,000 - $16,800) Total Dividends for Common Shares: $8,200 ($8,200 / 50,000) Per Common Share: $0.164
Case B: Total Cash Dividends:
25,000
Total Preferred Dividends (2010): (16,800)
Total Preferred Dividends (2011): 8,200
((16,800 + 8,200) / 8,400) Dividend Per Preferred Share: $2.9762 (8,400 x $2) Total Dividends for Preferred Shares: $25,000 Total Dividends for Common Shares: $0, because $25,000 is not enough to satisfy the required dividend amount for preferred shareholders. Per Common Share: $0
Simon Hua 37846136 COMM 293- SINCLAIR Case C: Total Cash Dividends:
75,000
Total Preferred Dividends (2010): (16,800)
Total Preferred Dividends (2011): (16,800)
Total Preferred Dividends (2012): (16,800)
Total Common Dividends (2012): 24,600
(16,800 x 3 / 8,400) Dividend Per Preferred Share: $6 (8,400 x $2 + 8,400 x $2) Total Dividends for Preferred Shares: $50,400 ($75,000 $50,400) Total Dividends for Common Shares: $24,600 ($24,600 / 50,000) Per Common Share: $0.492
2. Amount of Dollar Increase (Decrease) Item Cash DividendCommon Case C Stock Dividend Assets Decreased by $24,600 No effect Liabilities Current liabilities increased by $24,600 on the declaration date but decreased by $24,600 on the payment date. The net effect is zero. No effect Shareholders Equity $24,600 decrease in retained earnings No effect on total shareholders equity Summary: (1) Cash dividend decreases assets and shareholders equity by the amount of the dividend (2) Stock dividend has no effect on total assets or total shareholders equity because no resources are given out