Please read the scenario below, and then answer the questions that follow in a 3-page analysis. The questions will guide your analysis of the situation, but they will need to be presented as part of a report to the owner of the company.
Scenario:
The stockholders’ equity section of the balance sheet contains accounts such as the following:
- Common stock
- Preferred stock
- Additional paid in capital
- Other accumulated comprehensive income
- Retained earnings
It is important to understand how changes in the accounts impact the balance sheet and the financial position of the organization.
Ginseng Inc. has $200,000 of 5%, $10 par value preferred stock and $450,000 of $5 par value common stock issued and outstanding on December 31, 2021.
There were no stock issuances, stock splits, or stock dividends for 2021. The organization’s calendar year end is on December 31, 2021.
Preferred stock did not receive any dividends for 2019 or 2020 because the company did not have adequate cash reserves to pay out dividends.
Preferred stock has a mix of characteristics. The percentages are detailed as follows:
- 10% of the preferred stock is noncumulative, nonparticipating.
- 20% of the preferred stock is cumulative, nonparticipating.
- 20% of the preferred stock is noncumulative, participating.
- 50% of the preferred stock is cumulative, participating.
The current year’s net income is $795,000, and the company declared and paid dividends of $50,000 during the calendar year.
The beginning retained earnings balance at January 1, 2021 was $600,000. The company also had $80,000 in Treasury stock at December 31, 2021.
Based on the information presented in the scenario about the stockholder equity accounts of Ginseng Inc., answer the following questions.
- How many shares of preferred stock are outstanding on December 31, 2021?
- How many shares of common stock are outstanding on December 31, 2021?
- How many shares of the outstanding preferred stock are cumulative and participating at December 31, 2020?
- How many shares of the outstanding preferred stock are noncumulative and participating at December 31, 2020?
- How many shares of the outstanding preferred stock are cumulative and nonparticipating at December 31, 2020?
- How many shares of the outstanding preferred stock are noncumulative and nonparticipating at December 31, 2020?
- What amount of dividends in arrears was paid in 2021?
- What is the ending retained earnings balance for the organization at December 31, 2021?
- What type of account is Treasury stock?
- What is the normal balance for retained earnings?
- What is the normal balance for dividends?
- How do cash dividends that have been declared but not paid impact retained earnings?
Submitting your assignment in APA format means, at a minimum, you will need the following:
- Title page: Remember the running head. The title should be in all capitals.
- Length: 3 pages minimum
- Body: This begins on the page following the title page and abstract page and must be double-spaced (be careful not to triple- or quadruple-space between paragraphs). The typeface should be 12-pt. Times Roman or 12-pt. Courier in regular black type. Do not use color, bold type, or italics, except as required for APA-level headings and references. The deliverable length of the body of your paper for this assignment is 3 pages. In-body academic citations to support your decisions and analysis are required. A variety of academic sources is encouraged.
- Reference page: References that align with your in-body academic sources are listed on the final page of your paper. The references must be in APA format using appropriate spacing, hanging indent, italics, and uppercase and lowercase usage as appropriate for the type of resource used. Remember, the Reference page is not a bibliography but a further listing of the abbreviated in-body citations used in the paper. Every referenced item must have a corresponding in-body citation.
Please submit your assignment.
For assistance with your assignment, please use your text, Web resources, and all course materials.
Grading Rubric: Maximum 100 Points
Grading Criteria
Points
Deliverable requirements addressed; understanding of material and presenter’s message and intent are clear
40 points
Followed assignment guidelines and criteria
20 pts
Yes/Complete
Mostly
Not at all
Overall quality
20 pts
Excellent
Satisfactory
Needs Improvement
Scholarly research that supports the writer’s position is properly acknowledged and cited, and direct quotations do not exceed 10% of the word count of the body of the assignment deliverable
25 points
Title page, table of contents, tables, exhibits, appendices or reference page included
12.5 pts
Yes
Partially
Not at all
Content is original with less than 35% match
12.5 pts
Yes
36–50%
51% or over
Critical thinking: Position is well-justified; logical flow; examples
10 points
Position is justified with examples
5 pts
Excellent
Satisfactory
Needs Improvement
Presentation flows logically
5 pts
Excellent
Satisfactory
Needs Improvement
Structure: Includes introduction and conclusion, proper paragraph formatting, and reads as a polished academic paper or professional presentation, as appropriate for the required assignment deliverable
7.5 points
Includes introduction and conclusion
2.5 pts
Excellent
Satisfactory
Needs Improvement
Paragraphs are formatted properly
2.5 pts
Excellent
Satisfactory
Needs Improvement
Reads as polished academic paper or presentation
2.5 pts
Excellent
Satisfactory
Needs Improvement
Mechanical: No spelling, grammatical, or punctuation errors
10 points
Spelling and grammar are accurate
5 pts
Yes
Partially
Not at all
Punctuation is accurate
5 pts
Yes
Partially
Not at all
APA: Deliverable is cited properly according to the APA Publication Manual
7.5 points
References are cited in accordance with APA formatting
5 pts
Yes
Partially
Not at all
Reference page is included
2.5 pts
Yes
Partially
Not at all
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