15 Stockholders’ Equity Financial Reporting Problem 15
Financial Reporting Problem
The Procter & Gamble Company (P&G)
The financial statements of P&G are presented in Appendix B. The company’s complete annual report, including the notes to the financial statements, is available online.
Instructions
Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
(a) What is the par or stated value of P&G’s preferred stock?
(b) What is the par or stated value of P&G’s common stock?
(c) What percentage of P&G’s authorized common stock was issued at June 30, 2014?
(d) How many shares of common stock were outstanding at June 30, 2014, and June 30, 2013?
(e) What was the dollar amount effect of the cash dividends on P&G’s stockholders’ equity?
(f) What is P&G’s return on common stockholders’ equity for 2014 and 2013?
(g) What is P&G’s payout ratio for 2014 and 2013?
(h) What was the market price range (high/low) of P&G’s common stock during the quarter ended June 30, 2014?
Comparative Analysis Case
The Coca-Cola Company and PepsiCo, Inc.
The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies’ complete annual reports, including the notes to the financial statements, are available online.
Instructions
Use the companies’ financial information to answer the following questions.
(a) What is the par or stated value of Coca-Cola’s and PepsiCo’s common or capital stock?
(b) What percentage of authorized shares was issued by Coca-Cola at December 31, 2014, and by PepsiCo at December 31, 2014?
(c) How many shares are held as treasury stock by Coca-Cola at December 31, 2014, and by PepsiCo at December 31, 2014?
(d) How many Coca-Cola common shares are outstanding at December 31, 2014? How many PepsiCo shares of capital stock are outstanding at December 31, 2014?
(e) What amounts of cash dividends per share were declared by Coca-Cola and PepsiCo in 2014? What were the dollar amount effects of the cash dividends on each company’s stockholders’ equity?
(f) What are Coca-Cola’s and PepsiCo’s return on common/capital stockholders’ equity for 2014 and 2013? Which company gets the higher return on the equity of its shareholders?
(g) What are Coca-Cola’s and PepsiCo’s payout ratios for 2014?
(h) What was the market price range (high/low) for Coca-Cola’s common stock and PepsiCo’s capital stock during the fourth quarter of 2014? Which company’s (Coca-Cola’s or PepsiCo’s) stock price increased more (%) during
2014?
Financial Statement Analysis Cases
Case 1: Kellogg Company
Kellogg Company is the world’s leading producer of ready-to-eat cereal products. In recent years, the company has taken numerous steps aimed at improving its profitability and earnings per share. Presented below are some basic facts for Kellogg…
Instructions
(a) What are some of the reasons that management purchases its own stock?
(b) Explain how earnings per share might be affected by treasury stock transactions.
(c) Calculate the debt to assets ratio for 2013 and 2014, and discuss the implications of the change.
Case 2: Wiebold, Inc.
The following note related to stockholders’ equity was reported in Wiebold, Inc.’s annual report.
On February 1, the Board of Directors declared a 3-for-2 stock split, distributed on February 22 to shareholders of record on February 10. Accordingly, all numbers of common shares, except unissued shares and treasury shares, and all per share data have been restated to reflect this stock split.
On the basis of amounts declared and paid, the annualized quarterly dividends per share were $0.80 in the current year and $0.75 in the prior year.
Instructions
(a) What is the significance of the date of record and the date of distribution?
(b) Why might Wiebold have declared a 3-for-2 for stock split?
(c) What impact does Wiebold’s stock split have on (1) total stockholders’ equity, (2) total par value, (3) outstanding shares, and (4) book value per share?
Accounting, Analysis, and Principles
On January 1, 2017, Agassi Corporation had the following stockholders’ equity accounts.
…
Accounting
Journalize the above transactions. (Include entries to close net income to Retained Earnings.) Determine the ending balances for Paid-in Capital, Retained Earnings, and Stockholders’ Equity.
Analysis
Calculate the payout ratio and the return on common stockholders’ equity.
Principles
R. Federer is examining Agassi’s financial statements and wonders whether the “gains” or “losses” on Agassi’s treasury stock transactions should be included in income for the year. Briefly explain whether, and the conceptual reasons why, gains or losses on treasury stock transactions should be recorded in income.
