Story Inc. has 5,000 shares of 6%, $100 par value

| January 30, 2017

Question
(9) Story Inc. has 5,000 shares of 6%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2013. What is the annual dividend on the preferred stock?

a. $60 per share

b. $30,000 in total

c. $50,000 in total

d. $0.60 per share

The Remove-UR-Tattoo Clinic purchased a surgical laser for $84,000 on January 1, 2014. The estimated salvage value is $4,000. The laser has a useful life of five years and the clinic expects to use it 10,000 hours.

It was used for 900 hours in 2014; 2,100 hours in 2015; 2,400 hours in 2016.

Instructions

Showing all of your computations, compute the book value and the balance in the Accumulated Depreciation Account for December 31, 2015 under each of the following three methods after the depreciation for 2015 has been recorded:

(1) Straight-line:

2015 accumulated depreciation ____________________

2015 book value ____________________

(2) Units-of-activity:

2015 accumulated depreciation ____________________

2015 book value ____________________

(3) Double-declining balance:

2015 accumulated depreciation ____________________

2015 book value ____________________

On January 1, Steff Corporation had 80,000 shares of no-par common stock issued. 5,000 shares are held as treasury stock. The stock has a stated value of $5 per share. During the year, the following transactions occurred.

Apr. 1 Issued 12,000 additional shares of common stock for $18 per share.

June 15 Declared a cash dividend of $1 per share to stockholders of record on June 30.

July 10 Paid the $1 cash dividend.

Dec. 1 Purchased 7,000 additional shares of common stock for $17 per share.

Dec. 15 Declared a cash dividend on outstanding shares of $1.20 per share to shareholders of record on December 31.

Instructions: Prepare the entries, if any, on each of the dividend dates.

Essay Question 30 Points

Gloria Holiday, President and Chief Operating Officer of Software–R-Us, Inc., a software development company, was recently in a serious auto accident. As a result, she has been ordered to bed rest for 2 months. The accident was widely reported in the trade papers.

Just prior to the accident the company had almost completed the development of a new software product that will automate the design of new homes, to include ordering of materials, tracking labor costs, electronic bill paying, Wi Fi, online reporting and so forth. Preliminary testing has indicated the product to be stable. However, final testing is not complete, though, no problems are expected. The building industry “has heard it through the grapevine” about the product and is expected to quickly adopt the software. On the other hand, previous rollouts of some other products by Software-R-Us have not gone well with any number of programming and adoption issues.

Recently, the company has seen and experienced a reduction in the trading of their stock on the Over The Counter market. This has been attributed problems with previous rollouts, a general decline in housing starts, and a weakened economy.

Snydlee Whiplash, Acting President, has suggested forgoing the quarterly dividend payment in order to conserve cash for the rollout of the new product. Marketing consultants have recommended an extensive rollout program with displays at trade shows, construction supply businesses, advertising in trade related media, and so forth. The consultants believe that such a campaign will help to minimize reluctance on the part of purchasers based up past problems with other products by Software-R-Us.

On the other hand, the company has a 20 year history of quarterly cash dividend payments. Not paying the dividend could further reduce trading or possibly cause the stock to be dumped over concern for problems within the company due to the absence of Ms. Holiday. Snydlee has suggested a stock dividend in place of a cash dividend. This could further dilute earnings per share and weaken the stock price even further.

Are Snydlee Whiplash’s suggestions legal?

Is it ethical to discontinue the dividend?

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