STOCKHOLDERS’ EQUITY SECTION OF THE BALANCE SHEET

Purpose of Assignment

The purpose of this assignment is to help you become familiar with examining the stockholders’ equity section of the balance sheet.

Assignment Steps

Resources: Financial Accounting: Tools for Business Decision Making, Ch. 11

Answer the following questions in 1,050 words using the Lachlin Corporation Balance Sheet located on p. 575 of Financial Accounting:

 

E11-4 The stockholders’ equity section of Lachlin Corporation’s balance sheet at December 31 is presented here.

  • How many shares of common stock are outstanding?
  • Assuming there is a stated value, what is the stated value of the common stock?
  • What is the par value of the preferred stock?
  • If the annual dividend on preferred stock is $36,000, what is the dividend rate on preferred stock?
  • If dividends of $72,000 were in arrears on preferred stock, what would be the balance reported for retained earnings?

 

Consider the following as you read:

One of the greatest benefits of a publicly held corporation is its ability to raise large amounts of capital from the issuance of stock. The higher the value of each share of stock, the more money a corporation can raise in a short amount of time. However, corporations are also faced with the pressure to keep stockholders happy with increasing profits and good dividend payouts. As you read through the lessons consider the following:

  1. How can companies control the value of their stock?
  2. What are some methods that investors can use to determine if a corporation is worth investing in?

Use the Week 4 Excel® spreadsheet and submit with your answers.

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