1.
Rodriguez Corporation issues 19,000 shares of its common stock for $152,000 cash on February 20. Prepare journal entries to record this event under each of the following separate situations.
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|
| 1. | The stock has a $2 par value. |
| 2. | The stock has neither par nor stated value |
| 3. | The stock has a $5 stated value. |
| Transaction | General Journal | Debit | Credit |
| 1 | Cash | 152,000 | |
| Common stock, $2 par value | | 38,000 |
| Paid-in capital in excess of par value, common stock | | 114,000 |
| | | |
| 2 | Cash | 152,000 | |
| Common stock, no-par value | | 152,000 |
| | | |
| 3 | Cash | 152,000 | |
| Common stock, $5 stated value | | 95,000 |
| Paid-in capital in excess of stated value, common stock | | 57,000 |
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2.
York’s outstanding stock consists of 80,000 shares of noncumulative 7.5% preferred stock with a $5 par value and also 200,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends:
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| |
| 2015 | $ | 20,000 |
| 2016 | | 28,000 |
| 2017 | | 200,000 |
| 2018 | | 350,000 |
|
Determine the amount of dividends paid each year to each of the two classes of stockholders: preferred and common. Also compute the total dividends paid to each class for the four years combined. (Round "Dividend Rate (%)" to 1 decimal place and "Dividend per Preferred Share" to 3 decimal places.)
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|
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| Par Value per Preferred Share | Dividend Rate | Dividend per Preferred Share | Number of Preferred Shares | Preferred Dividend |
| Annual Preferred Dividend: | $5.00 | 7.5% | $0.375 | 80,000 | $30,000 |
| Total Cash Dividend Paid | Paid to Preferred | Paid to Common | Dividends in Arrears at year-end | |
| 2015 | $20,000 | $20,000 | | | |
| 2016 | 28,000 | 28,000 | | |
| 2017 | 200,000 | 30,000 | 170,000 | |
| 2018 | 350,000 | 30,000 | 320,000 | |
| Total: | $598,000 | $108,000 | $490,000 |
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3.
Ecker Company reports $2,700,000 of net income for 2015 and declares $388,020 of cash dividends on its preferred stock for 2015. At the end of 2015, the company had 678,000 weighted-average shares of common stock.
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| 1. | What amount of net income is available to common stockholders for 2015? |
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|
| |
| Net income | $2,700,000 |
| To preferred stockholders | (388,020) |
| Net income available to common stockholders | $2,311,980 |
|
| 2. | What is the company’s basic EPS for 2015? |
|
|
| Basic Earnings per Share |
| Choose Numerator: | / | Choose Denominator: | | Basic Earnings per Share |
| Net income available to common stockholders | / | Weighted-average outstanding shares | = | Basic earnings per share |
| $2,311,980 | / | 678,000 | = | $3.41 |
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4.
| The equity section of Cyril Corporation’s balance sheet shows the following: |
| | | | |
Preferred stock—6% cumulative, $25 par value, $30 call price,
10,000 shares issued and outstanding | | $ | 250,000 | |
| Common stock—$10 par value, 80,000 shares issued and outstanding | | | 800,000 | |
| Retained earnings | | | 535,000 | |
| |
|
| |
| Total stockholders’ equity | | $ | 1,585,000 | |
| |
|
| |
|
Determine the book value per share of the preferred and common stock under two separate situations.
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| 1. | No preferred dividends are in arrears. |
|
|
| Book Value per Preferred Share |
| Choose Numerator: | / | Choose Denominator: | = | Book Value per Preferred Share |
| Stockholders' equity applicable to preferred shares | / | Number of preferred shares outstanding | = | Book value per preferred share |
| $300,000 | / | 10,000 | = | $30.00 |
| Book Value per Common Share |
| Choose Numerator: | / | Choose Denominator: | = | Book Value per Common Share |
| Stockholders' equity applicable to common shares | / | Number of common shares outstanding | = | Book value per common share |
| $1,285,000 | / | 80,000 | = | $16.06 |
|
| 2. | Three years of preferred dividends are in arrears. |
|
|
| Book Value per Preferred Share |
| Choose Numerator: | / | Choose Denominator: | = | Book Value per Preferred Share |
| Stockholders' equity applicable to preferred shares | / | Number of preferred shares outstanding | = | Book value per preferred Share |
| $345,000 | / | 10,000 | = | $34.50 |
| Book Value per Common Share |
| Choose Numerator: | / | Choose Denominator: | = | Book Value per Common Share |
| Stockholders' equity applicable to common shares | / | Number of common shares outstanding | = | Book value per common share |
| $1,240,000 | / | 80,000 | = | $15.50 |
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5.
Unilever Group reports the following equity information for the years ended December 31, 2013 and 2012 (euros in millions).
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| December 31 | 2013 | 2012 |
| Share capital | | € | 484 | | | € | 484 | | |
| Share premium | | | 138 | | | | 140 | | |
| Other reserves | | | (6,746 | ) | | | (6,196 | ) | |
| Retained profit | | | 20,468 | | | | 20,964 | | |
| |
|
|
| |
|
|
| |
| Shareholders’ equity | | € | 14,344 | | | € | 15,392 | | |
| |
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| |
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| |
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| 1. |
Match each of the three account titles—share capital, share premium, and retained profit—with the usual account title applied under U.S. GAAP from the following options:
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|
| | |
| a. | Share capital | Common stock |
| b. | Share premium | Paid-in capital in excess of par value |
| c. | Retained profit | Retained earnings |
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| 2. |
Prepare Unilever’s journal entry, using its account titles, to record the issuance of capital stock assuming that its entire par value stock was issued on December 31, 2012, for cash. (Enter your answers in millions of euros and not in whole euros.)
|
| Transaction | General Journal | Debit | Credit |
| 1 | Cash | 624 | |
| Share capital (at par value) | | 484 |
| Share premium | | 140 |
| 3. |
What were Unilever’s 2013 dividends assuming that only dividends and income impacted retained profit for 2013 and that its 2013 income totaled €5,263? (Enter your answers in millions of euros and not in whole euros.)
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6.
Alexander Corporation reports the following components of stockholders’ equity on December 31, 2015:
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| | | | |
Common stock—$25 par value, 50,000 shares authorized,
30,000 shares issued and outstanding | | $ | 750,000 | |
| Paid-in capital in excess of par value, common stock | | | 50,000 | |
| Retained earnings | | | 340,000 | |
| |
|
| |
| Total stockholders’ equity | | $ | 1,140,000 | |
| |
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| |
|
In year 2016, the following transactions affected its stockholders’ equity accounts.
|
| Jan. | 2 |
Purchased 3,000 shares of its own stock at $25 cash per share.
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| Jan. | 7 |
Directors declared a $1.50 per share cash dividend payable on Feb. 28 to the Feb. 9 stockholders of record.
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| Feb. | 28 | Paid the dividend declared on January 7. |
| July | 9 | Sold 1,200 of its treasury shares at $30 cash per share. |
| Aug. | 27 | Sold 1,500 of its treasury shares at $20 cash per share. |
| Sept. | 9 |
Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record.
|
| Oct. | 22 | Paid the dividend declared on September 9. |
| Dec. | 31 |
Closed the $52,000 credit balance (from net income) in the Income Summary account to Retained Earnings.
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| Required: |
| 1. |
Prepare journal entries to record each of these transactions for 2016.
|
| Date | General Journal | Debit | Credit |
| Jan 02 | Treasury stock, common | 75,000 | |
| Cash | | 75,000 |
| | | |
| Jan 07 | Retained earnings | 40,500 | |
| Common dividend payable | | 40,500 |
| | | |
| Feb 28 | Common dividend payable | 40,500 | |
| Cash | | 40,500 |
| | | |
| Jul 09 | Cash | 36,000 | |
| Treasury stock, common | | 30,000 |
| Paid-in capital, treasury stock | | 6,000 |
| | | |
| Aug 27 | Cash | 30,000 | |
| Paid-in capital, treasury stock | 6,000 | |
| Retained earnings | 1,500 | |
| Treasury stock, common | | 37,500 |
| | | |
| Sep 09 | Retained earnings | 59,400 | |
| Common dividend payable | | 59,400 |
| | | |
| Oct 22 | Common dividend payable | 59,400 | |
| Cash | | 59,400 |
| | | |
| Dec 31 | Income summary | 52,000 | |
| Retained earnings | | 52,000 |
| 2. |
Prepare a statement of retained earnings for the year ended December 31, 2016. (Amounts to be deducted should be indicated by a minus sign.)
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|
|
| ALEXANDER CORPORATION |
| Statement of Retained Earnings |
| For Year Ended December 31, 2016 |
| Retained earnings, December 31, 2015 | $340,000 |
| Add: Net income | 52,000 |
| 392,000 |
| Less: Cash dividends declared | (99,900) |
| Less: Treasury stock reissuances | (1,500) |
| Retained earnings, December 31, 2016 | $290,600 |
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| 3. |
Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2016.(Amounts to be deducted should be indicated by a minus sign.)
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|
|
| ALEXANDER CORPORATION |
| Stockholders’ Equity Section of the Balance Sheet |
| December 31, 2016 |
| Common stock - $25 par value | $750,000 |
| Paid-in capital in excess of par value, common stock | 50,000 |
| Retained earnings | 290,600 |
| Less cost of treasury stock | (7,500) |
| Total stockholders’ equity | $1,083,100 |
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7.
Kinkaid Co. is incorporated at the beginning of this year and engages in a number of transactions. The following journal entries impacted its stockholders’ equity during its first year of operations.
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| General Journal | Debit | Credit |
| a. | Cash | 300,000 | |
| Common Stock, $25 Par Value | | 250,000 |
| Paid-In Capital in Excess of Par Value, Common Stock | | 50,000 |
| | | |
| b. | Organization Expenses | 150,000 | |
| Common Stock, $25 Par Value | | 125,000 |
| Paid-In Capital in Excess of Par Value, Common Stock | | 25,000 |
| | | |
| c. | Cash | 43,000 | |
| Accounts Receivable | 15,000 | |
| Building | 81,500 | |
| Notes Payable | | 59,500 |
| Common Stock, $25 Par Value | | 50,000 |
| Paid-In Capital in Excess of Par Value, Common Stock | | 30,000 |
| | | |
| d. | Cash | 120,000 | |
| Common Stock, $25 Par Value | | 75,000 |
| Paid-In Capital in Excess of Par Value, Common Stock | | 45,000 |
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| 2. | How many shares of common stock are outstanding at year-end? |
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| Number of outstanding shares | 20,000 |
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| 3. |
What is the amount of minimum legal capital (based on par value) at year-end?
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| Minimum legal capital | $500,000 |
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| 4. | What is the total paid-in capital at year-end? |
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| Total paid-in capital | $650,000 |
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| 5. |
What is the book value per share of the common stock at year-end if total paid-in capital plus retained earnings equals $695,000?
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| Book Value per Common Share |
| Choose Numerator: | / | Choose Denominator: | = | Book Value per Common Share |
| Stockholders' equity applicable to common shares | / | Number of common shares outstanding | = | Book value per common share |
| $695,000 | / | 20,000 | = | $34.75 |
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Questions 8-10
[The following information applies to the questions displayed below.] |
| Kohler Corporation reports the following components of stockholders’ equity on December 31, 2015: |
|
Common stock—$10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding
| $ | 400,000 |
| Paid-in capital in excess of par value, common stock | | 60,000 |
| Retained earnings | | 270,000 |
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| Total stockholders' equity | $ | 730,000 |
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| In year 2016, the following transactions affected its stockholders’ equity accounts. |
|
| Jan. | 1 | | Purchased 4,000 shares of its own stock at $20 cash per share. |
| Jan. | 5 | |
Directors declared a $2 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.
|
| Feb. | 28 | | Paid the dividend declared on January 5. |
| July | 6 | | Sold 1,500 of its treasury shares at $24 cash per share. |
| Aug. | 22 | | Sold 2,500 of its treasury shares at $17 cash per share. |
| Sept. | 5 | |
Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.
|
| Oct. | 28 | | Paid the dividend declared on September 5. |
| Dec. | 31 | |
Closed the $388,000 credit balance (from net income) in the Income Summary account to Retained Earnings.
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8.
| Required: |
| 1. |
Prepare journal entries to record each of these transactions for 2016.
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| Date | General Journal | Debit | Credit |
| Jan 01 | Treasury stock, Common | 80,000 | |
| Cash | | 80,000 |
| | | |
| Jan 05 | Retained earnings | 72,000 | |
| Common dividend payable | | 72,000 |
| | | |
| Feb 28 | Common dividend payable | 72,000 | |
| Cash | | 72,000 |
| | | |
| Jul 06 | Cash | 36,000 | |
| Treasury stock, Common | | 30,000 |
| Paid-in capital, Treasury stock | | 6,000 |
| | | |
| Aug 22 | Cash | 42,500 | |
| Paid-in capital, Treasury stock | 6,000 | |
| Retained earnings | 1,500 | |
| Treasury stock, Common | | 50,000 |
| | | |
| Sep 05 | Retained earnings | 80,000 | |
| Common dividend payable | | 80,000 |
| | | |
| Oct 28 | Common dividend payable | 80,000 | |
| Cash | | 80,000 |
| | | |
| Dec 31 | Income summary | 388,000 | |
| Retained earnings | | 388,000 |
9.
| 2. |
Prepare a statement of retained earnings for the year ended December 31, 2016. (Amounts to be deducted should be indicated by a minus sign.)
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|
|
| KOHLER CORPORATION |
| Statement of Retained Earnings |
| For Year Ended December 31, 2016 |
| Retained earnings, Dec. 31, 2015 | $270,000 |
| Add: Net income | 388,000 |
| 658,000 |
| Less: Cash dividends declared | (152,000) |
| Less: Treasury stock reissuances | (1,500) |
| Retained earnings, Dec. 31, 2016 | $504,500 |
|
10.
| 3. |
Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2016.
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|
|
| KOHLER CORPORATION |
| Stockholders' Equity Section of the Balance Sheet |
| December 31, 2016 |
| Common stock - $10 par value | $400,000 |
| Paid-in capital in excess of par value, common stock | 60,000 |
| Total contributed capital | 460,000 |
| Retained earnings | 504,500 |
| Total stockholders' equity | $964,500 |
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Questions 11-16
[The following information applies to the questions displayed below.]
Raphael Corporation’s common stock is currently selling on a stock exchange at $85 per share, and its current balance sheet shows the following stockholders’ equity section:
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Preferred stock—5% cumulative, $___ par value, 1,000 shares
authorized, issued, and outstanding | $ | 50,000 |
Common stock—$___ par value, 4,000 shares authorized, issued,
and outstanding | | 80,000 |
| Retained earnings | | 150,000 |
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|
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| Total stockholders' equity | $ | 280,000 |
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11-16
| Required: |
| 1. | What is the current market value (price) of this corporation’s common stock? |
| 2. |
What are the par values of the corporation’s preferred stock and its common stock?
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|
|
| Par value |
| Corporation's preferred stock | $50 |
| Corporation's common stock | $20 |
|
3.
|
If no dividends are in arrears, what are the book values per share of the preferred stock and the common stock?
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|
|
| Book Value Per Preferred Share |
| Choose Numerator: | / | Choose Denominator: | = | Book Value Per Preferred Share |
| Stockholders' equity applicable to preferred shares | / | Number of preferred shares outstanding | = | Book value per preferred share |
| $50,000 | / | 1,000 | = | $50.00 |
|
|
|
| Book Value Per Common Share |
| Choose Numerator: | / | Choose Denominator: | = | Book Value Per Common Share |
| Stockholders' equity applicable to common shares | / | Number of common shares outstanding | = | Book value per common share |
| $230,000 | / | 4,000 | = | $57.50 |
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4.
|
If two years’ preferred dividends are in arrears, what are the book values per share of the preferred stock and the common stock?
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|
|
| Book Value Per Preferred Share |
| Choose Numerator: | / | Choose Denominator: | = | Book Value Per Preferred Share |
| Stockholders' equity applicable to preferred shares | / | Number of preferred shares outstanding | = | Book value per preferred share |
| $55,000 | / | 1,000 | = | $55.00 |
| Book Value Per Common Share |
| Choose Numerator: | / | Choose Denominator: | = | Book Value Per Common Share |
| Stockholders' equity applicable to common shares | / | Number of common shares outstanding | = | Book value per common share |
| $225,000 | / | 4,000 | = | $56.25 |
|
5.
|
If two years’ preferred dividends are in arrears and the preferred stock is callable at $55 per share, what are the book values per share of the preferred stock and the common stock?
|
|
|
| Book Value Per Preferred Share |
| Choose Numerator: | / | Choose Denominator: | = | Book Value Per Preferred Share |
| Stockholders' equity applicable to preferred shares | / | Number of preferred shares outstanding | = | Book value per preferred share |
| $60,000 | / | 1,000 | = | $60.00 |
| Book Value Per Common Share |
| Choose Numerator: | / | Choose Denominator: | = | Book Value Per Common Share |
| Stockholders' equity applicable to common shares | / | Number of common shares outstanding | = | Book value per common share |
| $220,000 | / | 4,000 | = | $55.00 |
|
6.1
|
If two years’ preferred dividends are in arrears and the board of directors declares cash dividends of $11,500, what total amount will be paid to the preferred and to the common shareholders?
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|
|
| |
| Total amount paid to the preferred shareholders | $7,500 |
| Total amount paid to the common shareholders | $4,000 |
|
6.2
|
What is the amount of dividends per share for the common stock?
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17.
| Prepare journal entries to record the following four separate issuances of stock. |
| 1. |
A corporation issued 4,000 shares of $5 par value common stock for $35,000 cash.
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| 2. |
A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $40,000. The stock has a $1 per share stated value.
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| 3. |
A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $40,000. The stock has no stated value.
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| 4. |
A corporation issued 1,000 shares of $50 par value preferred stock for $60,000 cash.
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| Transaction | General Journal | Debit | Credit |
| 1 | Cash | 35,000 | |
| Common stock, $5 par value | | 20,000 |
| Paid-in capital in excess of par value, Common stock | | 15,000 |
| | | |
| 2 | Organization expenses | 40,000 | |
| Common stock, $1 stated value | | 2,000 |
| Paid-in capital in excess of stated value, common stock | | 38,000 |
| | | |
| 3 | Organization expenses | 40,000 | |
| Common stock, no-par value | | 40,000 |
| | | |
| 4 | Cash | 60,000 | |
| Preferred stock, $50 par value | | 50,000 |
| Paid-in capital in excess of par value, preferred stock | | 10,000 |
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18.
Sudoku Company issues 7,000 shares of $7 par value common stock in exchange for land and a building. The land is valued at $45,000 and the building at $85,000. Prepare the journal entry to record issuance of the stock in exchange for the land and building.
| Transaction | General Journal | Debit | Credit |
| 1 | Land | 45,000 | |
| Building | 85,000 | |
| Common stock, $7 par value | | 49,000 |
| Paid-in capital in excess of par value, common stock | | 81,000 |
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19.
On June 30, 2015, Sharper Corporation’s common stock is priced at $62 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows.
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| | | | |
Common stock—$10 par value, 120,000 shares authorized, 50,000
shares issued and outstanding | | $ | 500,000 | |
| Paid-in capital in excess of par value, common stock | | | 200,000 | |
| Retained earnings | | | 660,000 | |
| |
|
| |
| Total stockholders’ equity | | $ | 1,360,000 | |
| |
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| |
|
| 1. |
Assume that the company declares and immediately distributes a 50% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares.
|
| a.,b.& c. |
Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.
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|
|
| Stock Dividend | Before Stock Dividend | Impact of Stock Dividend | After Stock Dividend |
| Common stock | $500,000 | 250,000 | $750,000 |
| Paid in capital in excess of par value | 200,000 | | 200,000 |
| Total contributed capital | 700,000 | 250,000 | 950,000 |
| Retained earnings | 660,000 | (250,000) | 410,000 |
| Total stockholders' equity | $1,360,000 | 0 | $1,360,000 |
|
| Number of common shares outstanding | 50,000 | 25,000 | 75,000 |
|
| 2. |
Assume that the company implements a 3-for-2 stock split instead of the stock dividend in part 1. Answer these questions about stockholders’ equity as it exists after issuing the new shares.
|
| a.,b.& c. |
Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.
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|
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| Stock Split | Before Stock Split | Impact of Stock Split | After Stock Split |
| Common stock | $500,000 | | $500,000 |
| Paid in capital in excess of par value | 200,000 | | 200,000 |
| Total contributed capital | 700,000 | | 700,000 |
| Retained earnings | 660,000 | | 660,000 |
| Total stockholders' equity | $1,360,000 | | $1,360,000 |
|
| Number of common shares outstanding | 50,000 | 25,000 | 75,000 |
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20.
York’s outstanding stock consists of 80,000 shares of cumulative 7.5% preferred stock with a $5 par value and also 200,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends:
|
| |
| 2015 | $ | 20,000 |
| 2016 | | 28,000 |
| 2017 | | 200,000 |
| 2018 | | 350,000 |
|
Determine the amount of dividends paid each year to each of the two classes of stockholders assuming that the preferred stock is cumulative. Also determine the total dividends paid to each class for the four years combined. (Round your "Dividend per Preferred Share" answers to 3 decimal places.)
|
|
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| Par Value per Preferred Share | Dividend Rate | Dividend per Preferred Share | Number of Preferred Shares | Preferred Dividend |
| Annual Preferred Dividend: | $5.00 | 7.5% | $0.375 | 80,000 | $30,000 |
| Total Cash Dividend Paid | Paid to Preferred | Paid to Common | Dividends in Arrears at year-end | |
| 2015 | $20,000 | $20,000 | | $10,000 | |
| 2016 | 28,000 | 28,000 | | 12,000 |
| 2017 | 200,000 | 42,000 | 158,000 | |
| 2018 | 350,000 | 30,000 | 320,000 | |
| Totals | $598,000 | $120,000 | $478,000 |
|
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