Exercise 13-13 (30 minutes)
1. Net income…………………………………………………………………………$960,000
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
Analysis: Stocks with PE ratios less than about 5 to 8 are likely viewed as
potentially undervalued by the market. Of the stocks above, an analyst
might investigate stock #4 as possibly undervalued with a PE ratio of 5.0.
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
Exercise 13-16 (20 minutes)
1.
Total stockholders’ equity……………………………………… $1,585,000
Less equity applicable to preferred shares
Call price ($30 x 10,000)………………………………………. $300,000
2.
Total stockholders’ equity……………………………………… $1,585,000
Less equity applicable to preferred shares
Call price ($30 x 10,000)………………………………………. $300,000
Exercise 13-17 (20 minutes)
1. Share capital Common stock
2. Cash………………………………………………………………. 624
3. 2013 Retained profit = 2012 Retained profit + 2013 Income – 2013 Dividends
Exercise 13-18 (40 minutes)
Part 1
Jan. 2 Treasury Stock, Common………………………………………75,000
Cash………………………………………………………………. 75,000
Purchased treasury stock (3,000 x $25).
Jan. 7 Retained Earnings………………………………………………..40,500
Feb. 28 Common Dividend Payable……………………………………40,500
July 9 Cash*…………………………………………………………………..36,000
Treasury Stock, Common**……………………………… 30,000
Aug. 27 Cash*…………………………………………………………………..30,000
Paid-In Capital, Treasury Stock………………………………6,000
Sept. 9 Retained Earnings………………………………………………..59,400
Oct. 22 Common Dividend Payable……………………………………59,400
Dec. 31 Income Summary………………………………………………….52,000
Exercise 13-18 (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
*From August 27 transaction of reissuance of treasury shares.
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
PROBLEM SET A
Problem 13-1A (30 minutes)
Part 1
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
Part 2
Number of outstanding shares
Issued in (a)………………………………… 10,000
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
Part 5
Book value per common share
Problem 13-2A (60 minutes)
Part 1
Jan. 1 Treasury Stock, Common………………………………………80,000
Jan. 5 Retained Earnings………………………………………………..72,000
Feb. 28 Common Dividend Payable……………………………………72,000
July 6 Cash*…………………………………………………………………..36,000
Treasury Stock, Common**……………………………… 30,000
Aug. 22 Cash*…………………………………………………………………..42,500
Sept. 5 Retained Earnings………………………………………………..80,000
Oct. 28 Common Dividend Payable……………………………………80,000
Dec. 31 Income Summary………………………………………………….388,000
Problem 13-2A (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
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
Problem 13-3A (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)
Oct. 25 Paid the cash dividend on common stock.
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
0
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
Shares purchased……………………………………………………………. 3 ,000
Cost per share………………………………………………………………….$ 10
Part 5
Net income
Retained earnings, beginning balance………………………………. $320,000
Less dividends: Jan. 5……………………………………………………. (20,000)
