$590,000
88,000
$678,000
$460,000
Corrections of error in prior year’s financial statements (65,000)
Retained earnings, beginning of year, as restated $395,000
250,000
$645,000
$20,000*
Retained earnings, beginning of year
Retained earnings, beginning of year
Add: Net income
For year ended _______________
B.Ex. 12.5 MESSER COMPANY
Statement of Retained Earnings
For year ended _______________
Add: Net income
B.Ex. 12.6 SALT & PEPPER, INC.
Statement of Retained Earnings
Deduct: Preferred dividends
Education.
B.Ex. 12.8 Retained earnings…………………………………
Stock dividend to be distributed….………… 300,000 **
Additional paid-in capital…………………… 210,000 ***
To record declaration of stock dividend.
510,000*
*750,000 shares x 4% x $17 = $510,000
Ex. 12.1 a.
b.
Ex. 12.2 a.
b.
h.
i.
$12,500,000
8,600,000
$3,900,000
For the Year Ended December 31, 20xx
Net sales ………………………………………………………………..
Costs and expenses (including applicable income tax)
Income from continuing operations
Discontinued operations:
Ex. 12.3 a.
Continuing Operations.)
SPORTS +, INC.
Income Statement
Diluted earnings per share
Comprehensive income
SOLUTIONS TO EXERCISES
Since Smiley is a small and growing corporation, the board of directors probably
None (Unissued shares of capital stock is not an asset.)
1,440 shares = [(200 x 2) x 120%] x 3
$17,280 = 1,440 x $12
Extraordinary item
Education.
b.
$3,875,000
3,100,000
775,000
The $21.43 earnings per share figure from continuing operations (part a) is
probably the most useful one for predicting future operating results for
Ex. 12.4 a. SOUTHERN SUPPLY
Income Statement
For the Year Ended December 31, 20xx
Net sales ………………………………………………………………
…
Less: Costs and expenses (including income tax) ……………………
Income before extraordinary items …………………………………
…
Education.
Ex. 12.6 a. 2016 2015 2014
$1.88 $1.575 (1) $1.20 (2)
b.
Ex. 12.7 a. 30
1 1,200,000 1,200,000
1 1,200,000 1,200,000
d.
Earnings per share ……………………………
…
July
June
Memorandum: Issued an additional 1,000,000 shares of capital stock in a 2-for-1
stock split. Par value reduced from $1 per share to $0.50 per share.
Apr.
Following the stock dividend, the earnings per share of earlier periods should be
retroactively restated to reflect the increased number of shares. In this situation, each “new”
Dividends ……………………………………………
Dividends Payable ………………………
…
To record the declaration of a dividend of $0.60
per share on 2 million shares of stock
outstanding.
Dividends Payable …………………………………
…
Declaration/payment of cash dividend—Decrease retained earnings
Declaration/distribution of stock dividend—No effect
Stock split—No effect
Ex. 12.8
The market value of the total Inland Co.’s shares outstanding is $1,320,000 (40,000 x
$33) before the stock dividend. Because the issuance of new shares has no effect on the
net assets of the company, there is no basis of predicting any change in total market
Education.
Ex. 12.11 a.
b.
c.
i.
j.
Ex. 12.12 a. $572,000
(282,000)
$290,000
b. $188,500
Change in value of available-for-sale investments* …………
Balance sheet.
Statement of retained earnings (or statement of stockholders’ equity).
Expenses ……………………………………………………………….
This information is not included in any formal financial statement—it is quoted
disclosure in financial statements. It is reported by investors’ services and in the
financial pages of most newspapers.
Income before income tax ………………………………
Other comprehensive income:
Statement of stockholders’ equity, and statement of cash flows.
Net income ………………………………………………………………
Revenues ……………………………………………………………….
Statement of comprehensive income, and statement of stockholders’ equity.
Education.
c.
Ex. 12.13 a.
b.
Ex. 12.14 a.
b.
220 shares x $40 = $8,800
Market value of portfolio before the four transactions: 100 shares x $65 = $6,500
* $17,500 $14,200 = $3,300 loss
$3,300 ($3,300 x 35% income tax benefit) = $2,145 net unrealized loss
Net income is unchanged.
Home Depot is a very aggressive company. It is constantly opening new
stores, re
q
uirin
g
lar
g
e amounts of ca
p
ital. The com
p
an
y
retains a si
g
nificant
p
ortion
10% stock dividend: 500,000 shares x 1.10 = 550,000 shares
2:1 stock split: 550,000 x 2 = 1,100,000 shares
Note: The cash dividends do not affect the number of outstanding shares.
$1 cash dividend: 550,000 shares x $1 = $550,000
Your portfolio after the four transactions is $8,800 compared to $6,500 before the
four transactions. In addition, you would have received cash dividends, as follows:
(100 shares x 1.10 x $1) + (110 shares x 2 x $0.60) = $110 + $132 = $242
Total cash paid: $550,000 + $660,000 = $1,210,000
Based on information in the Case-in-Point in this chapter, unless you have an
extreme need for cash, you should probably be pleased that Home Depot retains its
earnings rather than paying them to you in the form of higher dividends. The
Ex. 12.15 a.
b.
Home Depot, Inc. has one class of common stock in its capital structure. Ten
Home Depot has not reported any irregular items in its income statements over
the past three years.
Other comprehensive income was $104 million in 2011, a loss of $152 million in
2012, and $83 million of income in 2013.
Education.
30 Minutes, Medium
a.
Net sales 19,850,000$
Costs and ex
p
enses
(
includin
g
a
pp
licable income taxes
)
16
,
900
,
000
Income from continuin
g
o
p
erations 2
,
950
,
000
$
Discontinued o
p
erations:
(
(
(
,
,
$
$
(
$
(
$
PROBLEM 12.2
A
SLICK SOFTWARE, INC.
For the Year Ended December 31, 2015
Condensed Income Statement
SLICK SOFTWARE, INC.
$