Exercise 11-18 (Concluded)
Part 2
ALEXANDER CORPORATION
Statement of Retained Earnings
For Year Ended December 31, 2016
Retained earnings, December 31, 2015………………………. $340,000
Plus net income…………………………………………………….….. 52 ,000
392,000
Part 3
ALEXANDER CORPORATION
Stockholders’ Equity Section of the Balance Sheet
December 31, 2016
Common stock$25 par value, 50,000 shares
authorized, 30,000 shares issued and outstanding;
300 shares in treasury…………………..…………….….….…... $ 750,000
Paid-in capital in excess of par value, common stock.... 50,000
PROBLEM SET A
Problem 11-1A (30 minutes)
Part 1
a. To record sale of 10,000 ($250,000/$25 per share) shares of $25 par
b. To record issuance of 5,000 ($125,000/$25 per share) shares of $25
c. To record acquisition of assets and liabilities by issuing 2,000
($50,000/$25) shares of $25 par value common stock at $40 per share.
Part 2
Number of outstanding shares
Issued in (a)……….………………….….…. 10,000
Issued in (b)…………………………………. 5,000
Part 3
Minimum legal capital = Outstanding shares x Par value per share
Part 4
Total paid-in capital from common stockholders
From transaction (a)…………….……… $300,000
From transaction (b)…..….…............ 150,000
Part 5
Book value per common share
Total stockholders’ equity (given).... $695,000
Book value per common share........ $ 34.75 ($695,000 / 20,000 shares)
Problem 11-2A (60 minutes)
Part 1
Jan. 1 Treasury Stock, Common…………..…………………….….…80,000
Cash………………………………………..………………………. 80,000
Purchased treasury stock (4,000 x $20).
July 6 Cash*…………….…………………..……………..….….….….….…36,000
Treasury Stock, Common**…..………….….….….….… 30,000
Paid-In Capital, Treasury Stock***…..….….….…...... 6,000
Reissued treasury stock.
*(1,500 x $24) **(1,500 x $20) ***(1,500 x $4)
Aug. 22 Cash*……….…………………..…………….…..….….…….….…...42,500
Paid-In Capital, Treasury Stock……..……………….……….6,000
Declared $2 dividend on 40,000 outstanding shares.
Oct. 28 Common Dividend Payable………………….……..….….…..80,000
Cash………………………………………..………………………. 80,000
Paid cash dividend.
Problem 11-2A (Concluded)
Part 2
KOHLER CORPORATION
Statement of Retained Earnings
For Year Ended December 31, 2016
Retained earnings, December 31, 2015………………………. $270,000
Plus net income…………………………………………………….….. 388 ,000
658,000
Part 3
KOHLER CORPORATION
Stockholders’ Equity Section of the Balance Sheet
December 31, 2016
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
Problem 11-3A (45 minutes)
Part 1
Explanations for each of the journal entries
Oct. 2 Declared a cash dividend of $2 per share of common stock.
($60,000 / 30,000 shares)
Nov. 5 Distributed the common stock dividend.
Part 2
Oct. 2 Oct. 25 Oct. 31 Nov. 5 Dec. 1 Dec. 31
Common stock…..........$360,000 $360,000 $360,000 $396,000 $396,000 $396,000
Common stock
dividend distributable. . 0 0 36,000 0 0 0
Paid-in capital in
excess of par.............. 90,000 90,000 129,000 129,000 129,000 129,000
Problem 11-4A (45 minutes)
Part 1
Outstanding common shares
Jan. 5 Apr. 5 July 5 Oct. 5
Beginning balance…….….….….……. 40,000 40,000 40,000 40,000
Less treasury stock (Mar. 20)……... (3,000) (3,000) (3,000)
Part 2
Cash dividend amounts
Jan. 5 Apr. 5 July 5 Oct. 5
Outstanding shares……………….… 40,000 37,000 37,000 44,400
Part 3
Capitalization of retained earnings for small stock dividend
Number of shares………………………………..…………………………….. 7,400
Part 4
Cost per share of treasury stock
Total amount paid………………………….…………………………………... $ 30,000
Part 5
Net income
Retained earnings, beginning balance…..….….…..….….….…….. $320,000
Less dividends: Jan. 5……………………….………………..…………… (20,000)
Total before net income……………………….………………..….….….… $152,000
Plus net income……………………………………………….…………..….… ?
Retained earnings, ending balance……………………………….….… $400,000
Problem 11-5A (40 minutes)
1. Market price = $85 per share (current stock exchange price given)
2. Computation of par values of stock
Common: Paid-in amount / Number of shares = $80,000 / 4,000 = $20
3. Book values with no dividends in arrears
Book value per preferred share = par value (when not callable) = $50
Common stock
Total equity…………………….….….….…..…... $280,000
4. Book values with two years’ dividends in arrears
Preferred stock
Preferred stock par value…..…….….…........ $ 50,000
Plus two years’ dividends in arrears*…..... 5,000
Book value per preferred share….............. $ 55.00 ($55,000 / 1,000 shares)
Common stock
Total equity………………………………………..…. $280,000
Less equity for preferred…..….….….….….… (55,000)
Problem 11-5A (Concluded)
5. Book values with call price and two years’ dividends in arrears
Preferred stock
Preferred stock call price (1,000 x $55)....... $ 55,000
Plus two years’ dividends in arrears*…....... 5,000
Common stock
Total equity………………………………..…..….…... $280,000
Less equity for preferred….….….….….…....... (60,000)
6. Dividend allocation in total
Preferred Common Total
2 years’ dividends in arrears….........$ 5,000 $ 0 $ 5,000
Current year dividends…..…............. 2,500 2,500
7. Equity represents the residual interest of owners in the assets of the
business after subtracting claims of creditors. With few exceptions,
these assets and liabilities are reported at historical cost, not market
PROBLEM SET B
Problem 11-1B (30 minutes)
Part 1
a. To record sale of 3,000 ($3,000/$1 per share) shares of $1 par value
common stock for $40 ($120,000/3,000) per share.
organizing the company when the market value is $40 per share.
c. To record acquisition of assets and liabilities by issuing 800 ($800/$1
per share) shares of $1 par value common stock at $50 per share and
issuing a note for $18,300.
Part 2
Number of outstanding shares
Issued in (a)……………….………….….…... 3,000
Issued in (b)…………………………………... 1,000
Part 3
Minimum legal capital = Outstanding shares x Par value per share
Part 4
Total paid-in capital from common stockholders
From transaction (a)………..….….….…..$120,000
From transaction (b)………………..…….. 40,000
Total paid-in capital…….….….….….…...$260,000
Part 5
Book value per common share
Total stockholders’ equity (given)......$283,000
Outstanding shares (from 2)…………... 6,000
Problem 11-2B (60 minutes)
Part 1
Jan. 10 Treasury Stock, Common…………..…………………….….…480,000
Cash…………………………………..………………………….... 480,000
Purchased treasury stock (40,000 x $12).
Mar. 2 Retained Earnings…………..……………………………….….…240,000
Common Dividend Payable…………………….….….…. 240,000
Declared $1.50 dividend on 160,000 outstanding shares.
Nov. 25 Cash*……………….………………..……………..…….….….….….152,000
Paid-In Capital, Treasury Stock……………..………………..24,000
Retained Earnings………………..……………..…………..….…16,000
Dec. 1 Retained Earnings………………………..…………………..…...500,000
Declared $2.50 dividend on 200,000 outstanding shares.
Dec. 31 Income Summary……………………………….….….…….….…1,072,000
Retained Earnings…………..…………….…………….…... 1,072,000