141.
Financial reporting of net losses and retained earnings
A recent annual report of Dobbs, Inc., reported a net loss of approximately $63 million and
retained earnings of approximately $1.6 billion.
(a) Which financial statement shows computation of the $63 million net loss?
(b) Which financial statement includes the retained earnings figure of $1.6 billion?
(c) Explain how it is possible for Dobbs to report both a net loss of $63 million and
retained earnings of $1.6 billion in a single set of financial statements.
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142.
Stockholders’ Equity
Blake Corporation has the following accounts on December 31, 2015
Common Stock $.25 par, 1,000,000 authorized, 400,000 issued.
Preferred stock 6%, $100 par, cumulative, 5,000 shares authorized, 3,000 issued.
Treasury stock, 1,500 shares purchased at market value of $6 per share
Required:
(1) Prepare the stockholders’ equity section of the balance sheet.
(2) Prepare the journal entry for the purchase of the treasury stock.
(3) Blake paid the liability for dividends on March 1. Prepare the journal entry for the
payment.
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143.
Cash dividends and two classes of stock
Raymond Inc., has two classes of capital stock outstanding: 25,000 shares of 5%, $100 par
value cumulative preferred and 30,000 shares of $10 par value common. The company had
a deficit (negative balance in retained earnings) of $160,000 at the beginning of the
current year, and preferred dividends were three years in arrears. During the current year,
the company earned net income of $970,000. What will be the balance in the Retained
Earnings account at the end of the current year if the company takes all the actions
necessary to pay a dividend of $2.50 per share on the common stock? $________________
144.
What’s so “preferred” about preferred stocks?
Most preferred stocks do not have voting power, a basic right of common stock. Identify at
least two features of most preferred stocks that justify or support use of the term
preferred in describing these types of stock issues.
Student’s answer should include two of the following features of most preferred stocks
that justify the term
preferred
:
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145.
Factors affecting the market price of stocks
(a) Murdock Corporation has outstanding several different stock issues. For each of the
types of stock listed below, briefly describe a situation or circumstance that would cause
the market price of that type of stock to increase.
Preferred stock
Common stock
Convertible preferred stock
(b) How would the increase in market value of any of Murdock’s stock be reflected in
Murdock’s financial statements?
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146.
Book value per share and other computations
Shown below is information relating to the stockholders’ equity of Silver Waste
Management at December 31, 2015:
(a) Silver’s total legal capital at December 31, 2015, is $_______________.
(b) The total amount of Silver’s paid-in capital at December 31, 2015, is
$_________________.
(c) The average issue price per share of Silver’s preferred stock was $_______.
(d) The book value per share of common stock is $__________ per share.
(e) The balance in Retained Earnings at the beginning of the year was $1,237,500, and net
income for 2015 was $1,600,500. What was the amount of dividend declared on each share
of common stock during 2015? $_______ per share.
147.
Stock splits
Bainbridge Corporation recently patented an extraordinary invention that will allow
average homeowners to cheaply generate a large fraction of the electricity consumed in
their houses. As a result, the market price of Bainbridge’s common stock has soared to
$160 per share. Bainbridge is about to announce a 4 for 1 stock split. Explain why the
company would take this action?
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148.
Treasury stock transactions.
Jackson Corporation engaged in the following treasury stock transactions during the
current year:
Complete the following three general journal entries to record these treasury stock
transactions.
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