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Simon Hua 37846136

COMM 293- SINCLAIR


Assignment 7

P 12-10

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