a.
Net sales 61,440,000$
Costs and ex
p
enses
(
includin
g
income taxes on continuin
g
o
p
erations
)
5
3
,
980
,
000
Income from continuin
g
o
p
erations 7,460,000$
Discontinued o
p
erations:
O
p
eratin
g
income from car rental
(
net of income tax
)
670,000$
Gain on sale of car rental business
(
net of income tax
)
4
,
330
,
000
5,
000
,
000
(3
$
9
340
000
$
1
2
y
(0
2
34
$
0
19
1
68
$
PACIFIC AIRLINE
S
For the Year Ended December 31, 20xx
Income Statement
PACIFIC AIRLINE
S
30 Minutes, Medium
a.
Net sales 37,400,000$
Costs and ex
p
enses
(
includin
g
a
pp
licable income tax
)
21
,5
00
,
000
Income from continuin
g
o
p
erations 15
,
900
,
000
$
Discontinued o
p
erations:
O
p
eratin
g
income
(
net of income tax
)
205
,
000
$
PROBLEM 12.2B
BEACH, INC.
For the Year Ended December 31, 2015
Condensed Income Statement
BEACH, INC.
(
(
(
,
,
$
$
(
$
(
$
b
.
Retained earnin
g
s, December 31, 2014
As ori
g
inall
y
re
p
orted 10,700,000$
Less: Prior
p
eriod ad
j
ustment
(
net of income tax
)
310
,
000
(2
g
c.
Total cash dividends declared durin
g
2015
(
data
g
iven
)
2,000,000$
Less: Preferred stock dividend
(
100,000 shares x $6
p
er share
)
600
,
000
1
$
$
PROBLEM 12.2B
BEACH, INC.
For the Year Ended December 31, 2015
Statement of Retained Earnings
BEACH, INC. (concluded)
14
35 Minutes, Strong
a.
Net sales 10,200,000$
Costs and ex
p
enses:
Cost of
g
oods sold 4,000,000$
Sellin
g
ex
p
enses 1,050,000
General and administrative ex
p
enses 840,000
Loss from settlement of liti
g
ation 10,000
Income tax on continuin
g
o
p
erations
612
,
000
6
,5
12
,
000
$
Income from continuin
g
o
p
erations 3,688,000$
Discontinued o
p
erations:
PROBLEM 12.3B
DEXTER, INC.
For the Year Ended December 31, 2015
Income Statement
DEXTER, INC.
(240
(420
110
000
3
8
000
$
p
(0
y
6
6
$
b
.
Retained earnin
g
s, December 31, 2014
As ori
g
inall
y
re
p
orted 3,200,000$
Add: Prior
p
eriod ad
j
ustment
(
net of income tax
)
80
,
000
PROBLEM 12.3B
DEXTER, INC.
For the Year Ended December 31, 2015
Statement of Retained Earnings
DEXTER, INC. (concluded)
3
300
g
20 Minutes, Easy
Total Number Book Value
Stockholders’ of Shares per
E
qu
ity
O
u
t
s
t
an
di
ng
Sh
are
(
roun
d
e
d)
Be
g
innin
g
balance 1,200,000$ 20,000 60.00$
Jan. 16 Declared and distributed 5% stock div.
1
,
000
Balance 1,200,000$ 21,000 57.14$
Feb. 9 Acquired 300 shares of treasury stoc
k
at cost of $110.00
p
er share
(33
,
000)
(300)
39
000
300
21
000
Balance 1,206,000$ 42,000 28.71$
Nov. 22 Declared $12.00 per share cash dividend
(504
,
000)
Balance 702,000 42,000 16.71$
Dec. 31 Net income
174
,
000
Balance
876
,
000
$
42
,
000
20
.
86
$
PROBLEM 12.4B
SUNSTONE, INC.
Note to instructor: Net income actually increases book value throughout the year, not merely on the
date upon which net income is closed into retained earnings.
Education.
k
20 Minutes, Medium
a. Capital Stock
A
dditional Total
($1 pa
r
Paid-in Retained Treasury Stockholders’
va
l
ue
)
C
ap
i
ta
l
E
arn
i
ngs
S
toc
k
E
qu
i
ty
Balances, Januar
y
1, 20x
x
130,000$ 1,170,000$ 1,400,000$ –$ 2,700,000$
Prior period adjustment (net of income tax benefit) (47,000) (47,000)
Issuance of common stock; 20,000 shares @ $15 20,000 280,000 300,000
Declaration and distribution of 10% stock dividend
(163
000)
(163
000)
16
$
1
$
2
$
(32
$
3
$
g
PROBLEM 12.5B
DRY WALL, INC.
DRY WALL, INC.
Statement of Stockholders’ Equity
For the Year Ended December 31, 20xx
b. Declaration/distribution of a 10% stock dividend has no effect on total stockholders’
equity. Declaration of a cash dividend reduces total stockholders’ equity by the amount of
the dividend.
PROBLEM 12.5B
DRY WALL, INC. (concluded)
The two types of dividends do not have the same impact upon stockholders’ equity. A cash
dividend is a distribution of a corporation’s assets (cash) to stockholders and, as such,
Education.
40 Minutes, Strong
Jan 5 Dividends 560,000
Dividends Pa
y
able 560
,
000
Feb 18 560
,
000
Cash 560
,
000
A
p
r 20 10
,
000
10
,
000
y
,
,
,
p
y
k
y
p
,
,
p
30 27
,
975
Ca
p
ital Stock 27
,
975
Au
g
12 2
,
925 75
Treasur
y
Stock 3
,
000
,
,
,
,
Additional Paid-in Ca
p
ital: Treasur
y
Stoc
k
value $1. To be distributed on June 30 to
stockholders of record at June 22.
To record
p
a
y
ment of dividend declared Jan. 5.
Cash
Stock Dividend to Be Distributed
p
er share.
y
Treasur
y
Stock
dividend declared June 15.
Cash
559,500 outstandin
g
shares. Market
p
rice $11,
p
ar
Issued 27,975 shares of ca
p
ital stock as 5% stoc
k
To close Dividends account.
Dividends Pa
y
able
dividend
p
a
y
able on Feb. 18 to stockholders of
PROBLEM 12.6B
a. General Journal
GREENE, INC.
record on Jan. 31.
2015
To record declaration of $1
p
er share cash
y
,
b
.
Stockholders’ e
q
uit
y
:
Ca
p
ital stock, $1
p
ar value, 1,000,000 shares authorized,
587,975 shares issued, of which 200 are held in the treasury 587,975$
Additional
p
aid-in ca
p
ital:
From issuance of ca
p
ital stock 4,480,000$
From stock dividend 279,750
PROBLEM 12.6B
GREENE, INC.
December 31, 2015
Partial Balance Shee
t
GREENE, INC. (concluded)
y
30 Minutes, Strong
Net (from
Income Source)
NE D NE NE
DNENED
b. 1.
2.
5.
a.
Event
D = Decrease
NE = No effect
Declaration of a cash dividend has no immediate effect u
p
on net income or cash flows. It
increases current liabilities (dividends payable), but has no effect on current assets.
Also, retained earnings is decreased, resulting in a decrease in stockholders’ equity.
PROBLEM 12.7B
Stockholders’
Equity
Current
Assets
Net Cash Flow
cash and current assets are increased as a result of the cash received from sale of the
stock.
Declaration of a stock dividend results in a reclassification of amounts from Retained
Earnings to the Capital Stock and Additional Paid-in Capital accounts. It has no effect
on cash, current assets, stockholders’ equity, or net income.
HOT WATER, INC.
Payment of a cash dividend has no effect on revenue or expenses, but it reduces cash.
1
2
Education.