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Exercise 11-3 (15 minutes)
1. Cash................................................................................... 35,000
Common Stock, $5 Par Value*................................... 20,000
2. Organization Expenses.................................................... 40,000
Common Stock, $1 Stated Value............................... 2,000
3. Organization Expenses.................................................... 40,000
4. Cash....................................................................................60,000
Preferred Stock, $50 Par Value*................................. 50,000
Exercise 11-4 (15 minutes)
Land.................................................................................. 45,000
Building............................................................................ 85,000
**($45,000 + $85,000) – $49,000 = $81,000
Exercise 11-5 (20 minutes)
1.
a. Retained earnings
Before dividend........................................................................ $ 660,000
b. Total stockholders’ equity
Common stock$10 par value, 120,000 shares
authorized, 75,000 shares issued and outstanding........... $ 750,000
Paid-in capital in excess of par value.................................... 200,000
c. Number of outstanding shares
Outstanding shares before the dividend.............................. 50,000
2.
a. Retained earnings (no change)
Before and after stock split..................................................... $ 660,000
b. Total stockholders’ equity
Common stock$6.67 (rounded) par value, 180,000 shares
authorized, 75,000 shares issued and outstanding.............. $ 500,000
Paid-in capital in excess of par value.................................... 200,000
Total stockholders’ equity....................................................... $1,360,000
c. Number of outstanding shares
Outstanding shares before the split....................................... 50,000
Outstanding shares after the split.......................................... 75,000
3. From a stockholder’s point of view, there is no practical difference
between the stock dividend and the stock split. The number of
Exercise 11-6 (25 minutes)
1.
Feb. 5 Retained Earnings*........................................................480,000
Common Stock Dividend Distributable**............... 120,000
***$480,000 - $120,000 = $360,000
Feb.28 Common Stock Dividend Distributable........................120,000
2.
Before After
Total stockholders’ equity......................... $1,575,000 $1,575,000
Issued and distributable shares............... 60,000 72,000
Total book value of shares........................ $ 21,000 $ 21,000
* 800 shares x 120% = 960 shares.
3.
February 5 February 28
Market value per share.............................. $ 40 $ 33.40
Total market value of shares owned........ $ 32,000 $ 32,064
Note: The total market value of investor’s holdings is approximately the same
for February 5 and February 28. Assuming that the stock dividend is the only
Exercise 11-7 (10 minutes)
Exercise 11-8 (30 minutes)
Non-Cumulative
Preferred Common
2015 ($20,000 paid)
Preferred*....................................................... $ 20,000
2016 ($28,000 paid)
Preferred*....................................................... $ 28,000
2017 ($200,000 paid)
Preferred*....................................................... $ 30,000
Total for the year........................................... $ 30,000 $170,000
2018 ($350,000 paid)
Preferred*....................................................... $ 30,000
2015-2018 ($598,000 paid) _______ _______
Total for four years....................................... $108,000 $490,000
Exercise 11-9 (25 minutes)
Cumulative
Preferred Common
2015 ($20,000 paid)
Preferred*....................................................... $ 20,000
2016 ($28,000 paid)
Preferredarrears from 2015....................... $ 10,000
Preferred*....................................................... 18,000
(Note: $12,000 in preferred stock dividends in arrears.)
2017 ($200,000 paid)
Preferredarrears from 2016....................... $ 12,000
Preferred*....................................................... 30,000
(Note: $0 in preferred stock dividends in arrears.)
2018 ($350,000 paid)
Preferred*....................................................... $ 30,000
Commonremainder.................................... _______ $320,000
2015-2018 ($598,000 paid)
_______ _______
Total for four years....................................... $120,000 $478,000
Exercise 11-10 (25 minutes)
1. (a)
Oct. 11 Treasury Stock (5,000 x $25).........................................125,000
(b)
Nov. 1 Cash (1,000 x $31)..........................................................31,000
(c)
Nov. 25 Cash (4,000 x $20)..........................................................80,000
Paid-In Capital, Treasury Stock.....................................6,000
2. Changes to the equity section include the following
(i) The common stock account description line will change. After the
treasury stock purchase, it should read:
Common stock$10 par value; 72,000 shares
stock purchase.
(ii) The descriptions and dollar amounts for Paid-In Capital in Excess of
(iii) The retained earnings dollar balance will not change but its
description should change to read:
(iv) After the purchase, a deduction for the cost of treasury stock is
reported immediately before the total line for stockholders’ equity as:
(v) Total stockholders’ equity will change from $1,800,000 to $1,675,000.
Exercise 11-10 (Concluded)
Revised equity section appears as follows
Common stock$10 par value; 72,000 shares authorized
and issued; 5,000 shares in treasury...................................................$ 720,000
Paid-in capital in excess of par value, Common stock......................... 216,000
Retained earnings, $125,000 restricted by treasury stock................... 864,000
Total stockholders’ equity........................................................................$1,675,000
Exercise 11-11 (15 minutes)
Amos Company
Statement of Retained Earnings
For Year Ended December 31, 2015
Retained earnings, December 31, 2014, as previously reported.... $1,375,000
Prior period adjustment
Depreciation expense not recorded in 2013 (net of $4,500 in
Plus net income.................................................................................. 126,000
Exercise 11-12 (25 minutes)
1. Net income.....................................................................................$2,700,000
2. Net income available to common stockholders........................$2,311,980
Exercise 11-13 (30 minutes)
1. Net income......................................................................................$960,000
2. Net income available to common stockholders..................... $840,000
Exercise 11-14 (15 minutes)
Stock
Market Value
per Share
Divided
by
Earnings
per Share
Price-Earnings
Ratio
1............. $176.40 $12.00 = 14.7
2............. 96.00 10.00 = 9.6
Exercise 11-15 (15 minutes)
Dividend yield
1. $16.06 / $220.00 = 7.3%
2. $13.86 / $132.00 = 10.5%
Analysis: The yield of 1.2% on stock #4 is sufficiently low that it
Exercise 11-16 (20 minutes)
1.
Total stockholders’ equity.............................................. $1,585,000
Less equity applicable to preferred shares
Call price ($30 x 10,000)............................................... $300,000
Cumulative dividends in arrears (none)..................... 0 (300,000)
Equity applicable to common shares........................... $1,285,000
2.
Total stockholders’ equity.............................................. $1,585,000
Less equity applicable to preferred shares
Call price ($30 x 10,000)............................................... $300,000
Cumulative dividends in arrears (3 x 6% x $250,000)... 45,000 (345,000)
Equity applicable to common shares........................... $1,240,000
Exercise 11-17 (20 minutes)
1. Share capital Common stock
2. Cash........................................................................... 624
Share Capital (at Par Value)............................... 484
3. 2013 Retained profit = 2012 Retained profit + 2013 Income – 2013 Dividends
Exercise 11-18 (40 minutes)
Part 1
Jan. 7 Retained Earnings..........................................................40,500
Common Dividend Payable..................................... 40,500
Declared $1.50 dividend per share on 27,000
outstanding shares.
Feb. 28 Common Dividend Payable...........................................40,500
Cash........................................................................... 40,500
Paid cash dividend.
Sept. 9 Retained Earnings..........................................................59,400
Common Dividend Payable..................................... 59,400
Declared $2 dividend on 29,700 outstanding shares.
Oct. 22 Common Dividend Payable...........................................59,400
Cash........................................................................... 59,400
Paid cash dividend.
Dec. 31 Income Summary...........................................................52,000
Retained Earnings.................................................... 52,000
Closed Income Summary account.
