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

978-0078025754 Chapter 11 Solution Manual Part 2

March 26, 2020
Exercise 11-10 (25 minutes)
1. (a)
Oct. 11
Treasury Stock (5,000 x $25) ................................
125,000
Cash ..........................................................................
125,000
Purchased treasury stock.
(b)
2. Changes to the equity section include the following
(i) The common stock account description line will change. After the
treasury stock purchase, it should read:
Common stock$10 par value; 72,000 shares
Exercise 11-10 (Concluded)
Revised equity section appears as follows
Common stock$10 par value; 72,000 shares authorized
and issued; 5,000 shares in treasury .................................................
$ 720,000
Exercise 11-11 (15 minutes)
Amos Company
Statement of Retained Earnings
For Year Ended December 31, 2015
Retained earnings, December 31, 2014, as previously reported ....
$1,375,000
Prior period adjustment
Exercise 11-12 (25 minutes)
1. Net income .....................................................................................
$2,700,000
Less preferred dividends ............................................................
(388,020)
Exercise 11-13 (30 minutes)
1. Net income ......................................................................................
$960,000
Less preferred dividends ............................................................
(120,000)
Exercise 11-14 (15 minutes)
Stock
Market Value
per Share
Divided
by
Earnings
per Share
Price-Earnings
Ratio
1..............
$176.40
=
14.7
Exercise 11-15 (15 minutes)
Dividend yield
1. $16.06 / $220.00 = 7.3%
Exercise 11-16 (20 minutes)
1.
Total stockholders’ equity .............................................
$1,585,000
Less equity applicable to preferred shares
2.
Total stockholders’ equity .............................................
$1,585,000
Less equity applicable to preferred shares
Exercise 11-17 (20 minutes)
1. Share capital Common stock
2.
Cash ..........................................................................
624
3. 2013 Retained profit = 2012 Retained profit + 2013 Income 2013 Dividends
Exercise 11-18 (40 minutes)
Part 1
Jan. 2
Treasury Stock, Common .............................................
75,000
Jan. 7
Retained Earnings .........................................................
40,500
Paid cash dividend.
July 9
Cash* ...............................................................................
36,000
Treasury Stock, Common** ................................
30,000
Paid-In Capital, Treasury Stock*** .........................
6,000
Reissued treasury stock.
Reissued treasury stock.
*(1,500 x $20) **(1,500 x $25)
Sept. 9
Retained Earnings .........................................................
59,400
Common Dividend Payable ................................
59,400
Declared $2 dividend on 29,700 outstanding shares.
Closed Income Summary account.
Exercise 11-18 (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
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
Paid-in capital in excess of par value, common stock ...
50,000
PROBLEM SET A
Problem 11-1A (30 minutes)
Part 1
a. To record sale of 10,000 ($250,000/$25 per share) shares of $25 par
value common stock for $30 ($300,000/10,000 shares) per share.
Part 2
Number of outstanding shares
Issued in (a) .......................................
10,000
Issued in (b) .......................................
5,000
Part 3
Part 4
Total paid-in capital from common stockholders
From transaction (a) ........................
$300,000
Part 5
Problem 11-2A (60 minutes)
Part 1
Jan. 1
Treasury Stock, Common .............................................
80,000
Cash ..........................................................................
80,000
Purchased treasury stock (4,000 x $20).
Jan. 5
Retained Earnings .........................................................
72,000
July 6
Cash* ...............................................................................
36,000
Treasury Stock, Common** ................................
30,000
Paid-In Capital, Treasury Stock*** .........................
6,000
Reissued treasury stock.
*(1,500 x $24) **(1,500 x $20) ***(1,500 x $4)
*(2,500 x $17) **(2,500 x $20)
Sept. 5
Retained Earnings .........................................................
80,000
Common Dividend Payable ................................
80,000
Declared $2 dividend on 40,000 outstanding shares.
Oct. 28
Common Dividend Payable ..........................................
80,000
Problem 11-2A (Concluded)
Part 2
KOHLER CORPORATION
Statement of Retained Earnings
For Year Ended December 31, 2016
Retained earnings, December 31, 2015 ...........................
$270,000
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 11-3A (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)
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
Problem 11-4A (45 minutes)
Part 1
Outstanding common shares
Jan. 5
Apr. 5
July 5
Oct. 5
Beginning balance .........................
40,000
40,000
40,000
40,000
*(20% x 37,000)
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
Part 4
Cost per share of treasury stock
Part 5
Net income
Retained earnings, beginning balance ......................................
$320,000
Less dividends: Jan. 5 ..............................................................
(20,000)
Apr. 5 ..............................................................
(18,500)
Problem 11-5A (40 minutes)
1. Market price = $85 per share (current stock exchange price given)
2. Computation of par values of stock
3. Book values with no dividends in arrears
Book value per preferred share = par value (when not callable) = $50
Common stock
Total equity ................................................
$280,000
4. Book values with two years’ dividends in arrears
Preferred stock
Preferred stock par value ...........................
$ 50,000
Plus two years’ dividends in arrears* .......
5,000
Preferred equity ...........................................
$ 55,000
Problem 11-5A (Concluded)
5. Book values with call price and two years’ dividends in arrears
Preferred stock
Preferred stock call price (1,000 x $55) .......
$ 55,000
Plus two years’ dividends in arrears* .........
5,000
6. Dividend allocation in total
Preferred
Common
Total
2 years’ dividends in arrears ...........
$ 5,000
$ 0
$ 5,000
7. Equity represents the residual interest of owners in the assets of the
business after subtracting claims of creditors. With few exceptions,
these assets and liabilities are reported at historical cost, not market
PROBLEM SET B
Problem 11-1B (30 minutes)
Part 1
a. To record sale of 3,000 ($3,000/$1 per share) shares of $1 par value
common stock for $40 ($120,000/3,000) per share.
b. To record issuance of 1,000 ($1,000/$1 per share) shares of $1 par value
common stock to the company’s promoters for their efforts in
per share.
Part 2
Number of outstanding shares
Issued in (a) ..........................................
3,000
Part 3
Minimum legal capital = Outstanding shares x Par value per share
Part 4
Total paid-in capital from common stockholders
From transaction (a) ............................
$120,000
Part 5
Book value per common share
Problem 11-2B (60 minutes)
Part 1
Jan. 10
Treasury Stock, Common .............................................
480,000
Cash ..........................................................................
Purchased treasury stock (40,000 x $12).
Mar. 2
Retained Earnings .........................................................
240,000
Common Dividend Payable ................................
Declared $1.50 dividend on 160,000 outstanding shares.

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