Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 11 Stockholders’ Equity: Capital Stock and Dividends 529

successful common stock offering. Altama is estimated to generate annual net income of $4.5

million for 2004. Prior to the common stock offering, Phoenix had 4,460,000 shares of $0.01 par

value common stock issued and outstanding on December 31, 2003. Net income was $941,000

for 2003.

a. Provide the journal entry for the common stock issue in July 2004.

b. Determine the expected (pro forma) earnings per share from the acquisition assuming the

acquisition was included in operations for all of 2004 and there were no other changes in

operations. Assume the difference in the acquisition price and the common stock proceeds

was financed by the proceeds of 6% (after-tax) long-term debt.

c. Is the answer in (b) dilutive to earnings per share?

The recent market price per share and dividend per share are provided for five large financial

services and insurance companies traded on the New York Stock Exchange in the following

table:

Company Market Price per Share Dividend per Share

American International Group (AIG) $67.11 $0.50

Prudential Financial Inc. 53.99 0.63

Lincoln National 45.76 1.46

Hartford Financial Services Group 66.61 1.16

ING Groep, NV 28.81 0.99

a. Determine the dividend yield for the five companies. Round percentages to two decimal

places.

b. Why are the dividend yields different, even though these companies are from the same

industry?

c. Should you avoid investing in a company with a low dividend yield?

Thomas Nelson, Inc., is a publisher of Bibles and other religious materials. Thomas Nelson, Inc.,

had the following statement of stockholders’ equity for the fiscal year ended March 31, 2004:

Case 11-4

Dividend yield

Case 11-5

Statement of Stockholders’
Equity—Thomas Nelson, Inc.

Class B Additional

Common Common Paid-In Retained

Stock Stock Capital Earnings Total

Balance at March 31, 2003 $13,350 $1,025 $44,064 $29,385 $ 87,824

Net and comprehensive

income 16,165 16,165

Class B stock converted

to common 62 (62) —

Common stock issued:

Option plans—90,823

common shares 91 633 724

Dividends declared—

$0.12 per share (1,731) (1,731)

Balance at March 31, 2004 $13,503 $ 963 $44,697 $43,819 $102,982

Thomas Nelson, Inc.

Statement of Stockholders’ Equity

For the Fiscal Year Ended March 31, 2004

(in thousands, except per-share data)