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Reporting in Action — BTN 11-1
(All shares in thousands.)
1. As of September 28, 2013, the shares of common stock issued and
outstanding are 899,213 (see balance sheet). As of September 29, 2012,
For fiscal 2013, the shares outstanding at year-end were less than the
basic weighted-average shares outstanding during the year, which
2. Total stockholders’ equity as of September 28, 2013...... $123,549,000,000
3. As found on its statement of cash flows, Apple reported $10,564 million
4. Apple’s income statement reports the following
(Fiscal years) 2013 2012 2011
Basic earnings per common share.................. $40.03 $44.64 $28.05
5. Apple’s consolidated balance sheet reports no shares of treasury stock
as of September 28, 2013, or September 29, 2012.
Comparative Analysis — BTN 11-2
1. Book value per common share =
Apple’s book value per common share
= $123,549,000 / 899,213 = $137.40
2. Earnings per share =
Apple’s earnings per share: $37,037,000 / $925,331 = $ 40.03
3. Dividend yield =
Apple’s dividend yield: $11.40 / $477.25 = 2.39%
Analysis: The low (zero) dividend yield for Google implies that it would
“income stock” following a long period as a “growth stock.”
4. Price-earnings ratio =
Apple’s price-earnings ratio: $477.25 / $40.03 = 11.92
Interpretation: The price-earnings ratio of Google is more than 2 times
Ethics Challenge — BTN 11-3
During the course of her duties, Harriet has learned information that others
might not know. If she uses this information to trade in New World
Communicating in Practice — BTN 11-4
There is no set solution to this activity. Solutions will vary based on the
industry and the companies selected.
Taking It to the Net — BTN 11-5
1. The balance sheet of McDonald’s shows that they have both preferred
2. The preferred stock has no par value. There are 165.0 million preferred
3. In 2013, the financing section of the statement of cash flows shows that
4. In 2013, the financing section of the statement of cash flows shows that
Teamwork in Action — BTN 11-6
1. The team statement should include the following:
a. When a corporation “buys back” its stock (engages in a treasury
is a contra equity account that decreases equity.
b. Reasons for “buybacks”:
to use shares to acquire another corporation.
2. The team should establish the acquisition entry as follows
Treasury Stock, Common......................................... 13,400
Each member should prepare one of the following reissue entries:
a. Cash...........................................................................................13,400
Treasury Stock, Common.................................................. 13,400
shares costing $134 per share.
b. Cash...........................................................................................15,000
Paid-In Capital, Treasury Stock......................................... 1,600
c. Cash...........................................................................................12,000
Paid-In Capital, Treasury Stock...............................................1,400
Teamwork in Action (Continued)
d. Cash...........................................................................................12,000
Paid-In Capital, Treasury Stock...............................................1,000
e. Cash...........................................................................................12,000
Retained Earnings....................................................................1,400
3. When presenting and explaining the above entries to the team, the
following points should be made by the team members:
The similarities in all reissue entries a through e are:
The net affect of the transaction is to increase assets and equity by
the amount received on reissue.
The differences in reissue entries b through e are:
(b) Reissuing above cost creates additional Paid-In Capital.*
(c) Reissuing below cost reduces existing Paid-In Capital.*
Entrepreneurial Decision — BTN 11-7
1.
Plan A Plan B
Net income.............................................................. $ 72,000 $ 72,000
Less preferred dividends....................................... 0 (10,000)
Net income for common stockholders................. $ 72,000 $ 62,000
2.
Plan A Plan B
Net income.............................................................. $ 16,800 $ 16,800
Less preferred dividends....................................... 0 (10,000)
Net income for common stockholders................. $ 16,800 $ 6,800
Founder’s return on equity.................................... 3.6% 1.8%
3. The difference between the answers for parts 1 and 2 arises from the
percent of return generated with the assets invested in the corporation.
These results indicate that the 8% dividend rate on the preferred stock
is advantageous to the founder as long as the rate of return on the
Hitting the Road — BTN 11-8
There is no formal solution for this field activity. Students often find this
assignment interesting as it highlights the relevance of their accounting
Global Decision — BTN 11-9
1. Book value per common share =
Samsung’s book value per common share = ₩149,896,543 / 130.915
= ₩ 1,144,991
2. Earnings per share:
= (Net income – Preferred dividends) / Weighted-average common shares outstanding
= Net income available for common stock / Weighted-average common shares outstanding
3. Samsung’s EPS is ₩197,841, and Samsung declared 14,300 in cash₩
dividends per share during fiscal year 2013. Consequently, for the
