Type
Solution Manual
Book Title
Financial Accounting Fundamentals 5th Edition
ISBN 13
978-0078025754

978-0078025754 Chapter 11 Solution Manual Part 1

March 26, 2020
Chapter 11
Corporate Reporting and Analysis
QUESTIONS
1. Organization expenses (costs) are incurred in creating a corporation. Examples include:
2. Organization expenses (costs) are reported as expenses when incurredas part of
3. The board of directors of a corporation is responsible for directing the corporation's
affairs. The directors are elected by the corporation’s stockholders.
4. Authorized shares represent the maximum number of shares that a corporation’s charter
5. The preemptive right of common stockholders is the right to maintain their relative
6. The general rights of common stockholders include: (1) the right to vote in
stockholders’ meetings, (2) the right to sell or otherwise dispose of stock, (3) the
7. The market value per share of stock is the price at which a share of stock is bought or
8. The par value is an arbitrary value placed on a share of stock when it is authorized. The
9. Convertible preferred stock is potentially attractive because it offers the safety of a
10. The three important dates governing dividends are:
a. date of declarationthe date the directors vote to pay a dividend.
11. Cash dividends debited against paid-in capital accounts are called liquidating dividends
12. Declaring a stock dividend has no effect on assets, liabilities, or total equity. Also, the
13. A stock dividend results in a distribution of additional shares to stockholders and the
capitalization of retained earnings. A stock split calls in the old shares and replaces
14. A stock dividend should not be considered income because it does not transfer any
assets from the corporation to the stockholders.
15. A treasury stock purchase reduces total assets and total equity by equal amounts.
16. Treasury stock purchases affect the corporate assets and stockholders’ equity just like a
17. With a simple capital structure, earnings per share is calculated by first subtracting any
18. A stock option is the right to purchase common stock at a fixed price over a specified
period.
19. When a corporation has no preferred stock, book value per share is calculated by
20. Apple discloses on its fiscal 2013 balance sheet that it has 1,800,000 common shares
21. The par value for Google’s preferred stock is reported to be $0.001. A low par value can
22. From a review of its statement of cash flows, Samsung did not report any cash outlay in
QUICK STUDIES
Quick Study 11-1 (10 minutes)
True statements: 3, 4, 5 and 7
Quick Study 11-2 (5 minutes)
a.
Cash ..........................................................................
375,000
Common Stock, $5 Par Value ............................
375,000
Quick Study 11-3 (5 minutes)
a.
Cash* .........................................................................
648,000
Common Stock, $2 Par Value** .........................
72,000
Paid-In Capital in Excess of Par Value,
Quick Study 11-4 (5 minutes)
a.
Cash ....................................................................................
1,827,000
Quick Study 11-5 (15 minutes)
Cash ..........................................................................
297,500
Common Stock, $4 Par Value ............................
170,000
Paid-In Capital in Excess of Par Value,
Quick Study 11-6 (10 minutes)
July 15
Retained Earnings .........................................................
165,000
Common Dividend Payable ................................
165,000
Quick Study 11-7 (10 minutes)
Jun Company
Stockholders’ Equity
April 2 (after stock dividend)
Common stock$5 par value, 375,000 shares
authorized, 220,000 shares issued and outstanding ................
$1,100,000
Paid-in capital in excess of par value, common stock.................
900,000
Total paid-in capital ........................................................................
2,000,000
Quick Study 11-8 (10 minutes)
True statements: 1, 2 and 4
Quick Study 11-9 (5 minutes)
1.
Cash* ...................................................................................
510,000
Preferred Stock, $100 Par Value** ...............................
500,000
2. Preferred dividend =
Quick Study 11-10 (10 minutes)
Total cash dividend ...........................................................................
$110,000
Quick Study 11-11 (10 minutes)
May 3
Treasury Stock (4,000 shares) ................................
36,000
Cash ..........................................................................
36,000
Purchased treasury stock
Quick Study 11-12 (10 minutes)
1. No impact
Quick Study 11-13 (10 minutes)
1. This material error should be reported on the statement of retained
earnings (and/or the statement of stockholders’ equity) as a prior
2. This change in the expected useful life is a change in an accounting
estimateaffecting current and future accounting periods. Therefore,
Quick Study 11-14 (10 minutes)
Quick Study 11-15 (10 minutes)
Quick Study 11-16 (10 minutes)
Price-earnings ratio = = 5.2
Quick Study 11-17 (10 minutes)
Market value per share
Net income - Preferred dividends
Net income - Preferred dividends
$20.54
Quick Study 11-18 (10 minutes)
Total stockholders' equity ................................................................
$1,850,000
Quick Study 11-19 (10 minutes)
Cash ..........................................................................
3,271
EXERCISES
Exercise 11-1 (15 minutes)
Characteristic
Corporations
1.
Owner authority and control ......................
One vote per share
2.
Ease of formation ........................................
Requires government approval
3.
Transferability of ownership ......................
Readily transferred
Exercise 11-2 (15 minutes)
1.
Cash ..........................................................................
152,000
Common Stock, $2 Par Value* .........................
38,000
2.
Cash ..........................................................................
152,000
3.
Cash ..........................................................................
152,000
Common Stock, $5 Stated Value* ....................
95,000
Exercise 11-3 (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
3.
Organization Expenses ...................................................
40,000
4.
Cash ...................................................................................
60,000
Preferred Stock, $50 Par Value* ................................
50,000
Exercise 11-4 (15 minutes)
Land ..................................................................................
45,000
Building ............................................................................
85,000
Exercise 11-5 (20 minutes)
1.
a. Retained earnings
Before dividend ........................................................................
$ 660,000
$10 par value of 25,000 dividend shares ...............................
(250,000)
After dividend ...........................................................................
$ 410,000
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
3. From a stockholder’s point of view, there is no practical difference
Exercise 11-6 (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
3.
February 5
February 28
Market value per share .............................
$ 40
$ 33.40
Exercise 11-7 (10 minutes)
Exercise 11-8 (30 minutes)
Non-Cumulative
Preferred
Common
2015 ($20,000 paid)
Preferred* ......................................................
$ 20,000
Commonremainder ...................................
_______
$ 0
Total for the year ..........................................
$ 20,000
$ 0
2016 ($28,000 paid)
Preferred* ......................................................
$ 28,000
Commonremainder ...................................
_______
$ 0
Total for the year ..........................................
$ 28,000
$ 0
Exercise 11-9 (25 minutes)
Cumulative
Preferred
Common
2015 ($20,000 paid)
Preferred* ......................................................
$ 20,000
Preferred* ......................................................
18,000
Commonremainder ...................................
_______
$ 0
Total for the year ..........................................
$ 28,000
$ 0
(Note: $12,000 in preferred stock dividends in arrears.)
(Note: $0 in preferred stock dividends in arrears.)
dividends skipped in prior years.

Subscribe Now

Sign up to view full document

View Document