Transaction Analysis: Shareholders’ Equity
RMN Corp. had a variety of shareholders’ equity transactions in 2000. It had the following balances in Shareholders’ Equity accounts and Cash and other assets accounts at the beginning of 2000:
|
Cash and other assets |
$78,000,000 |
|
Common stock, $1.00 par value |
5,000,000 |
|
Capital in excess of par |
25,000,000 |
|
Retained earnings |
50,000,000 |
|
Treasury stock (40,000 shares) |
(2,000,000) |
RMN had the following transactions that affected shareholders’ equity during 2000:
1. Issue five million shares of no par preferred stock at a price of $4.00.
2. Sell the treasury stock for $4,500,000.00.
3. Earn net income of $35,000,000.00.
4. Declare and pay dividends of $10,000,000.00.
5. Employee stock options were granted with the purchase of 100,000 shares of common stock. The market price is currently $7 per share. The exercise price is $7 per share.
6. The stock options were exercised and the company issued the 100,000 shares. The current market price is $8 per share.
Required:
Record these transactions in each of the components of shareholders’ equity and in Cash and other assets. Use the balance sheet equation to calculate the ending balance in each account.