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EXERCISES
Exercise 13-1 (15 minutes)
Characteristic Corporations
1. Owner authority and control......................One vote per share
2. Ease of formation.......................................Requires government approval
Exercise 13-2 (15 minutes)
1.
Feb. 20 Cash.........................................................................152,000
2.
Feb. 20 Cash.........................................................................152,000
3.
Feb. 20 Cash.........................................................................152,000
Exercise 13-3 (15 minutes)
1. Cash................................................................................. 35,000
2. Organization Expenses.................................................. 40,000
3. Organization Expenses.................................................. 40,000
4. Cash..................................................................................60,000
Exercise 13-4 (15 minutes)
Land................................................................................ 45,000
Building.......................................................................... 85,000
Exercise 13-5 (20 minutes)
1.
a. Retained earnings
b. Total stockholders’ equity
Common stock$10 par value, 120,000 shares
c. Number of outstanding shares
2.
a. Retained earnings (no change)
b. Total stockholders’ equity
Common stock$6.67 (rounded) par value, 180,000 shares
c. Number of outstanding shares
3. From a stockholder’s point of view, there is no practical difference
Exercise 13-6 (25 minutes)
1.
Feb. 5 Retained Earnings*.......................................................480,000
Common Stock Dividend Distributable**.............. 120,000
Paid-In Capital in Excess of Par Value,
2.
Before After
Total stockholders’ equity........................ $1,575,000 $1,575,000
3.
February 5 February 28
Market value per share............................. $ 40 $ 33.40
Note: The total market value of investor’s holdings is approximately the same
Exercise 13-7 (10 minutes)
Exercise 13-8 (30 minutes)
Non-Cumulative
Preferred Common
2015 ($20,000 paid)
2016 ($28,000 paid)
Preferred*..................................................... $ 28,000
2017 ($200,000 paid)
2018 ($350,000 paid)
2015-2018 ($598,000 paid) _______ _______
Exercise 13-9 (25 minutes)
Cumulative
Preferred Common
2015 ($20,000 paid)
Preferred*..................................................... $ 20,000
2016 ($28,000 paid)
Preferredarrears from 2015....................... $ 10,000
2017 ($200,000 paid)
Preferredarrears from 2016....................... $ 12,000
2018 ($350,000 paid)
Preferred*..................................................... $ 30,000
* The holders of the cumulative preferred stock are entitled to no more than
Exercise 13-10 (25 minutes)
1. (a)
(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:
The dollar balance of this account does not change with a treasury
stock purchase.
(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 13-10 (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
Exercise 13-11 (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
tax benefits)............................................................................... ($55,500)
Exercise 13-12 (25 minutes)
1. Net income...................................................................................$2,700,000
2. Net income available to common stockholders.......................$2,311,980
