a. The preparation of the stockholders' equity section of the balance sheet at December 31 foro Marigold Corp. is as follows:
<h3>Stockholders' Equity Section:</h3>
Marigold Corporation
<h3>Balance Sheet</h3>
At December 31, 2019
Common Stock ($5 par value)
186,560 shares issued and outstanding $932,800
Paid-in Capital in Excess of Par Value-Common Stock 268,880
Retained Earnings 446,408
Total equity $1,648,088
b. The payout ratio and return on common stockholders' equity are as follows:
Payout ratio = Cash Dividends/Net Income
= 94% ($206,912/$220,000 x 100)
Return on Common Stockholders' Equity = Net Income/Beginniing Outstanding Equity
= 13.5% ($220,000/$1,635,000 x 100)
<h3>Data and Analysis:</h3>
Common Stock ($10 par value)
84,800 shares issued and outstanding $848,000
Paid-in Capital in Excess of Par Value-Common Stock 218,000
Retained Earnings 569,000
Total equity $1,635,000
Jan. 15 Retained Earnings $94,976 (84,800 x $1.12) Cash Dividends Payable $94,976
Feb. 15 Dividends Payable $94,976 Cash $94,976
Apr. 15 Retained Earnings $135,680 Stock Dividends Payable $135,680 ($16 x 84,800 x 10%)
May 15 Stock Dividends Payable $135,680 Common Stock $84,800 Paid-in Capital in Excess of Par Value $50,880
July 1 Common Stock increased to 186,560 at $5 each (84,800 + 8,480 x 2)
Dec. 1 Retained Earnings $111,936 (186,560 x $0.60) Cash Dividends Payable $111,936
Dec. 31 Net income for the year = $220,000
<h3>Retained Earnings:</h3>
Beginning balance $569,000
Net Income 220,000
Dividends:
Jan. 15 Cash Dividends (94,976)
Apr. 15 Stock Dividends (135,680)
Dec. 1 Cash Dividends (111,936)
Ending balance $446,408
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