$80,000
50,000
75,000
$205,000
B.Ex. 11.2 $100,000
250,000
Additional paid-in capital:
B.Ex. 11.1 Common stock (10,000 shares @ $8)
Additional paid-in capital (10,000 shares @ $5)
Retained earnings
Total stockholders’ equity
10,000 x $100 par x 8% x 4 years = $320,000
Preferred stock (1,000 shares @ $100)
Common stock (10,000 shares @ $25)
Education.
B.Ex. 11.6
B.Ex. 11.7
$11,550,000
$4,000,000
200,000 4,200,000
B.Ex. 11.9 $1,000,000
Dividends in arrears (40,000 shares x $5)
Additional paid-in capital
The book value on common stock is calculated by adding all stockholders’ equity
accounts together and dividing by the number of shares of common stock
outstanding:
Total stockholders’ equity ($4,000,000 + $5,000,000 + $800,000 +
$1,750,000)
double, the par value will be reduced to half, or $5 per share, leaving the total
stockholders’ equity attributable to common stock unchanged.
Common stock (100,000 shares @ $10)
($1,000,000 + $750,000 + $800,000)/100,000 shares =
This amount does not reflect the current market value of the stock. Instead, it
reflects a per-share amount of the assets, less liabilities, included in the company’s
balance sheet.
Less: Preferred stock at par value
Education.
Ex. 11.1 a. (1)
(a)
SOLUTIONS TO EXERCISES
Organizing the scuba diving school as a sole proprietorship.
Easy to form
Advantages:
Education.
Ex. 11.3 a.
$ 250,000
140,000
$736,000
$360,000
Dividends ($50 x .09 x 40,000 x 2 years) ………….
the financial statements. Capital stock is recorded at the amount for which it was
originally issued.
Stockholders’ equity:
8% cumulative preferred stock, $100 par value,
5,000 shares authorized, 2,500 shares issued and outstanding ……
…
Common stock, $2 stated value, 100,000 shares authorized,
70,000 shares issued and outstanding…………………………………
…
Additional paid-in capital:
Ex. 11.4 a.
Dividends on 9% cumulative preferred stock:
Total dividends paid in third year ……………………………………
…
e. $ 143,450,000
15,000,000
Total stockholders’ equity …………………………………………
…
Less: Par value of preferred stock (150,000 shares x $100) ………
…
Ex. 11.8 a.
200,000$
300,000
452,800
Net assets (stockholders’ equity):
8% cumulative preferred stock …………………………………………
Common stock, $5 par, 60,000 shares issued …………………………
…
Additional paid-in capital ………………………………………………
…
disclosed, but does not reduce the total amount of retained earnings of a company.
The restriction on retained earnings simply limits the amount of dividends the
corporation can pay as long as it holds treasury stock.
Ex. 11.10 a.
c.
Ex. 11.11 a.
Ex. 11.12 a.
Had the stock been split 2-for-1, it would begin trading at approximately $40 per
When the market price of a corporation’s common stock appreciates in value
significantly, as it had in the case of Fido Corporation, it may become too
probably made with the intent of making it more affordable to investors.
Companies sometimes purchase shares of their own common stock to help boost
the market price per share. This practice is not generally considered unethical,
given that information pertaining to the purchase is fully disclosed in the
asset.
Kimberly-Clark could sell approximately 810.7 million additional shares. This
figure is determined by subtracting the number of issued shares from the
Education.
Ex. 11.13 a. 6,600,000
5,500,000
b.
$4,000,000
5,500,000$
400,000
Cash (550,000 x $12)………………………………
Common Stock (550,000 x $10)……………
Additional Paid-in Capital on Common
Preferred stock, 6%, $100 par value, 60,000 shares authorized,
40,000 shares issued and outstanding
Stockholders’ Equity:
Note: No entry is required to record the
authorization to issue preferred and common stock.
Additional paid-in capital:
Common stock, $10 par value, 1,200,000 shares authorized, 550,000
shares issued
Preferred stock
Education.
Ex. 11.14 a. $1,000,000
800,000
30,000
Common Stock, $10 par value, 300,000 shares authorized, 100,000
shares issued
Additional paid-in capital on common stock
Additional paid-in capital on treasury stock
Transactions
Education.
Ex. 11.15 a.
b.
c.
The par value is $.05 per share. The common stock originally sold significantly
The number of authorized shares of common stock is 10 billion. Authorized
$17,777 million. This amount is not how much the outstanding stock is actually
worth. The total stockholders’ equity figure represents the amount invested in
Education.