Owner’s Equity

Question 1

What costs are added to APIC? What costs reduce APIC?

Answer 1

Registration and issuance costs REDUCE APIC

Legal and consulting fees are expensed

Question 2

Book Value Per Share

Answer 2

Stockholders Equity - dividends owed
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Common shares - treasury stock

Question 3

Wood Co. owns 2,000 shares of Arlington zinc’s 20,000 shares of $100 par, 6% cumulative, nonparticipating preferred stock and 1,000 shares (2%) of Arlo’s common stock. During 20X2, Arlo declared and paid dividends of $240,000 on preferred stock. No dividends had been declared or paid during 20X1. In addition, Wood received a 5% common stock dividend from Arlo when the quoted market price of Arlo’s common stock was $10 per share. What amount should Wood report as dividend income in its 20X2 income statement?

Answer 3

$24,000

20X1 cumulative dividends
20X2 regular preferred dividends
Total dividend paid for 20X2:
$240,000*

*the preferred stock dividend pays all required dividends in full

Note: The 5% common stock dividend is not income. The increased number of shares simply serves to divide the total equity into smaller units