Question

1. Hayes Enterprises began 2003 with a retained earnings balance of $820,000. During 2003, the firm earned $470,000 after taxes. From this amount, preferred stockholders were paid $47,000 in dividends. At year-end 2003, the firm's retained earnings totaled $1,040,000. The firm had 120,000 shares of common stock outstanding during 2003.

a. Prepare a statement of retained earnings for the year ended December 31, 2003, for Hayes Enterprises. (Note: Be sure to calculate and include the amount of cash dividends paid in 2003.)

b. Calculate the firm's 2003 earnings per share (EPS).

c. How large a per-share cash dividend did the firm pay on common stock during 2003?

Answer 1

Answer:

Hayes Enterprises

a. A Statement of Retained Earnings for the year ended December 31, 2003

January 2003 Retained Earnings Balance  $820,000

After taxes earnings during 2003                  470,000

Retained earnings available =                    $1,290,000

Preferred dividends =                                       (47,000)

Retained earnings available for common $1,243,000

Common stock dividends =                          (203,000)

Retained Earnings Balance =                    $1,040,000

b. 2003 Earnings per share (EPS) = $1.69

c. The company paid $1.69 cash dividend to common stock during 2003.

Explanation:

a) Data and Calculations:

January 2003 Retained Earnings Balance  $820,000

After taxes earnings during 2003                  470,000

Retained earnings available =                    $1,290,000

Preferred dividends =                                       (47,000)

Retained earnings available for common $1,243,000

Common stock dividends =                          (203,000) ($1,243,000 -$1,040,000)

Retained Earnings Balance =                    $1,040,000

Outstanding common stock shares = 120,000