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Chapter 13 - Accounting for Corporations
Exercise 13-3 (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
Issued stock to promoters.
3. Organization Expenses.................................................... 40,000
Common Stock, No-Par Value................................... 40,000
Issued stock to promoters.
4. Cash....................................................................................60,000
Preferred Stock, $50 Par Value*................................. 50,000
Exercise 13-4 (15 minutes)
Land.................................................................................. 45,000
Building............................................................................ 85,000
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Chapter 13 - Accounting for Corporations
Exercise 13-5 (20 minutes)
1.
a. Retained earnings
Before dividend........................................................................ $ 660,000
$10 par value of 25,000 dividend shares............................... (250,000)
After dividend........................................................................... $ 410,000
b. Total stockholders’ equity
Common stock$10 par value, 120,000 shares
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
3. From a stockholder’s point of view, there is no practical difference
between the stock dividend and the stock split. The number of
shares will be increased equivalently under either approach, and the
market value change, if any, should be approximately the same.
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Chapter 13 - Accounting for Corporations
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
Issued and distributable shares............... 60,000 72,000
* 800 shares x 120% = 960 shares.
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)
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Chapter 13 - Accounting for Corporations
Exercise 13-8 (30 minutes)
Non-Cumulative
Preferred Common
2015 ($20,000 paid)
2016 ($28,000 paid)
2017 ($200,000 paid)
Preferred*....................................................... $ 30,000
Commonremainder..................................... _______ $170,000
Total for the year........................................... $ 30,000 $170,000
2018 ($350,000 paid)
2015-2018 ($598,000 paid) _______ _______
Total for four years....................................... $108,000 $490,000
* The holders of the noncumulative preferred stock are entitled to no more than
$30,000 of dividends in any one year (7.5% x $5 x 80,000 shares).
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Chapter 13 - Accounting for Corporations
Exercise 13-9 (25 minutes)
Cumulative
Preferred Common
2015 ($20,000 paid)
Preferred*....................................................... $ 20,000
Commonremainder..................................... _______ $ 0
Total for the year........................................... $ 20,000 $ 0
(Note: $10,000 in preferred stock dividends in arrears.)
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
Commonremainder..................................... _______ $320,000
Total for the year........................................... $ 30,000 $320,000
(Note: $0 in preferred stock dividends in arrears.)
2015-2018 ($598,000 paid)
_______ _______
Total for four years....................................... $120,000 $478,000
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Chapter 13 - Accounting for Corporations
Exercise 13-10 (25 minutes)
1. (a)
Oct. 11 Treasury Stock (5,000 x $25).........................................125,000
Cash........................................................................... 125,000
Purchased treasury stock.
(b)
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:
(iii) The retained earnings dollar balance will not change but its
description should change to read:
Retained earnings ($125,000 restricted for treasury stock).............$864,000
(v) Total stockholders’ equity will change from $1,800,000 to $1,675,000.
Exercise 13-10 (Concluded)
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Chapter 13 - Accounting for Corporations
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
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
Exercise 13-13 (30 minutes)
13-731
1. Net income......................................................................................$960,000
2. Net income available to common stockholders..................... $840,000
Exercise 13-14 (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 13-15 (15 minutes)
Dividend yield
1. $16.06 / $220.00 = 7.3%
Analysis: The yield of 1.2% on stock #4 is sufficiently low that it
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