Chapter 11 – Reporting and Interpreting Owners’ Equity
108. The following information is available for Bradford Bikes for the years 2011 and 2010:
Requirements:
A. Calculate the dividend yield ratio for both 2011 and 2010.
B. Interpret the yield ratio in terms of whether it is high or low, whether it indicates a steady
dividend policy, and whether Bradford Bikes appears to be growing or stagnant.
Chapter 11 – Reporting and Interpreting Owners’ Equity
109. The following information is available for Italiano Ices for the years 2011 and 2010:
Requirements:
A. Calculate the dividend yield for both 2011 and 2010.
B. Does the dividend yield appear to be low, moderate or high and what caused the change in
the yield from 2010 to 2011?
Chapter 11 – Reporting and Interpreting Owners’ Equity
11–62
110. Tractor Corporation was just formed. The following accounts of Tractor Corporation,
with code letters, are needed to record the transactions given below. You are to indicate the
appropriate journal entry for each transaction by entering the code letters and the correct
amounts. The transactions including the example are independent unless otherwise stated.
Chapter 11 – Reporting and Interpreting Owners’ Equity
Chapter 11 – Reporting and Interpreting Owners’ Equity
11–64
111. HighRise Company reported the following amounts of contributed capital in the
stockholders’ equity accounts as of January 1, 2010:
Indicate the journal entry required to record each of the following transactions by entering the
letter code corresponding to each account to be debited and credited and the amount of each
debit and credit. The transactions including the example are independent unless otherwise
stated.
Chapter 11 – Reporting and Interpreting Owners’ Equity
Chapter 11 – Reporting and Interpreting Owners’ Equity
112. On January 1, 2010, the stockholders’ equity section of Gibbons Corporation’s balance
sheet reported the following:
During 2010, the following selected transactions occurred (assume they occurred in the order
given):
(1) Issued a 10% stock dividend; 1,000 shares issued when the market price was $12.
(2) 200 shares of treasury stock were purchased at $11 per share.
(3) Declared and paid a cash dividend of $19,800.
(4) Net income was $30,000.
Prepare the stockholders’ equity section of the balance sheet as of December 31, 2010
Chapter 11 – Reporting and Interpreting Owners’ Equity
113. On January 1, 2010, the accounts of Mac Corporation showed the following:
During 2010, the following transactions occurred affecting stockholders’ equity (in the order
given):
A. Issued a 100% stock dividend when the market price was at $5 per share.
B. Purchased treasury stock, 1,000 shares at a total cost of $8,000.
C. Declared and paid cash dividends, $15,000.
D. Net income for 2010, $25,000.
Required:
The stockholders’ equity section of the balance sheet for the company must be prepared for
the December 31, 2010 balance sheet. It is given below with certain amounts missing. Supply
the missing amounts by entering them in the blanks.
Chapter 11 – Reporting and Interpreting Owners’ Equity
114. On December 31, 2010, Brave Corporation reported the following on its balance sheet:
Chapter 11 – Reporting and Interpreting Owners’ Equity
115. During 2010, Sanders Corporation made the following journal entry to record the
declaration and payment of a cash dividend:
The total par values of common and preferred stock outstanding were $70,000 and $40,000,
respectively. No dividends were declared or paid during 2009. There are 1,000 shares of
common treasury stock.
Requirements:
A. If the preferred stock is noncumulative, calculate the current dividend rate on the preferred
stock.
B. If the preferred stock is cumulative, calculate the current dividend rate on the preferred
stock.
Chapter 11 – Reporting and Interpreting Owners’ Equity
116. Wedge Corporation has the following capital stock outstanding:
$1 par value common stock, 250,000 shares.
8% preferred stock, par $100, 5,000 shares, cumulative, with 2 years in arrears.
Cash dividends of $150,000 were declared and paid near the end of the current year.
Requirements:
A. Calculate the dividends received by the preferred stockholders.
B. Calculate the dividends received by the common stockholders.
Chapter 11 – Reporting and Interpreting Owners’ Equity
117. Marlin, Inc., declared a cash dividend of $40,000 in 2009 when the following stocks
were outstanding:
No dividends were declared or paid during the prior year. Compute the amount of cash that
would be paid to each stockholder group under each of the following separate cases.
Chapter 11 – Reporting and Interpreting Owners’ Equity
118. Identify the effects on cash flow from financing activities of the following activities as
increasing (+), decreasing (-) or having no effect on financing cash flows:
Chapter 11 – Reporting and Interpreting Owners’ Equity
11–73
119. Determine the effect of the following transactions on the financial statement components
identified. Code your answers as follows:
A: If the transaction results in an increase in the financial statement component.
B: If the transaction results in a decrease in the financial statement component.
C. If the transaction does not affect the financial statement component.
Transaction 1: Common stock was sold at a price in excess of par value.
Net income_____
Total assets_____
Stockholders’ equity_____
Transaction 2: Treasury stock was purchased using cash.
Net income_____
Total assets_____
Stockholders’ equity_____
Transaction 3: Treasury stock was sold for cash at a price less than the treasury stock’s cost.
Net income_____
Total assets_____
Stockholders’ equity_____
Chapter 11 – Reporting and Interpreting Owners’ Equity
Chapter 11 – Reporting and Interpreting Owners’ Equity
11–75
120. Determine the effect of the following transactions on the financial statement components
identified. Code your answers as follows:
A: If the transaction results in an increase in the financial statement component.
B: If the transaction results in a decrease in the financial statement component.
C. If the transaction does not affect the financial statement component.
Transaction 1: A cash dividend was declared.
Net income_____
Total assets_____
Total liabilities______
Stockholders’ equity_____
Transaction 2: A previously declared cash dividend was paid.
Net income_____
Total assets_____
Total liabilities
Stockholders’ equity_____
Transaction 3: A 2-for-1 stock split was declared and distributed.
Net income_____
Total assets_____
Total liabilities_____
Stockholders’ equity_____
Transaction 4: A common stock dividend was declared and distributed.
Net income_____
Total assets_____
Total liabilities_____
Stockholders’ equity_____
Chapter 11 – Reporting and Interpreting Owners’ Equity
Chapter 11 – Reporting and Interpreting Owners’ Equity
121. Prepare journal entries for each of the following AJ Partnership transactions:
1. A and J each contribute cash into the partnership in exchange for capital.
2. A makes a cash withdrawal from the partnership.
3. Partnership net income is allocated to the partners’ capital accounts.
4. A’s drawing account is closed.