- Name of the corporation.
- State of incorporation.
- Nature of its operations.
- Total assets for the most recent balance sheet.
- Total revenues for the most recent income statement.
- Net income for the most recent income statement.
- Classes of stock outstanding.
- Market price of the stock outstanding.
- High and low price of the stock for the past year.
- Dividends paid for each share of stock during the past year.
In groups of three or four, discuss each corporate profile. Select one of the corporations, as-
suming that your group has $100,000 to invest in its stock. Summarize why your group selected
the corporation it did and how financial accounting information may have affected your deci-
sion. Keep track of the performance of your corporation’s stock for the remainder of the term.
Note:Most major corporations maintain home pages on the Internet. This home page pro-
vides a variety of information on the corporation and often includes the corporation’s financial
statements. In addition, the New York Stock Exchange Web site (http://www.nyse.com) includes
links to the home pages of many listed companies. Financial statements can also be accessed us-
ing EDGAR, the electronic archives of financial statements filed with the Securities and Exchange
Commission (SEC).
SEC documents can also be retrieved using the EdgarScan™ service from Price-
waterhouseCoopersathttp://edgarscan.pwcglobal.com. To obtain annual report information,
key in a company name in the appropriate space. EdgarScan will list the reports, available to
you for the company you’ve selected. Select the most recent annual report filing, identified as a
10-K or 10-K405. EdgarScan provides an outline of the report, including the separate financial
statements, which can also be selected in an Excel®spreadsheet.534 Chapter 11 Stockholders’ Equity: Capital Stock and Dividends
ANSWERS TO SELF-STUDY QUESTIONS
- C If a corporation has cumulative preferred stock out-
standing, dividends that have been passed for prior years
plus the dividend for the current year must be paid before
dividends may be declared on common stock. In this case,
dividends of $27,000 ($9,000 3) have been passed for the
preceding three years, and the current year’s dividends are
$9,000, making a total of $36,000 (answer C) that must be paid
to preferred stockholders before dividends can be declared on
common stock. - D Paid-in capital is one of the two major subdivisions
of the stockholders’ equity of a corporation. It may result
from many sources, including the issuance of cumulative
preferred stock (answer A), declaring a stock dividend (answer
B), or the sale of a corporation’s treasury stock (answer C).
3. C Reacquired stock, known as treasury stock, should be
listed in the Stockholders’ Equity section (answer C) of the
balance sheet. The price paid for the treasury stock is de-
ducted from the total of all the stockholders’ equity accounts.
4. C If a corporation that holds treasury stock declares a
cash dividend, the dividends are not paid on the treasury
shares. To do so would place the corporation in the position
of earning income through dealing with itself. Thus, the
corporation will record $44,000 (answer C) as cash dividends
[(25,000 shares issued less 3,000 shares held as treasury
stock)$2 per share dividend].
5. C The dividend yield is 5% ($2.40 ÷ $48.00). The divi-
dend payout ratio is 60% ($2.40 ÷ $4.00). The book value per
share is not used in any of the calculations.