Chapter 12 – Income and Changes in Retained Earnings
Financial and Managerial Accounting, 17e 12-7
CHAPTER 12 NAME _________ # ____________
10-MINUTE QUIZ B SECTION
The stockholders’ equity section of the balance sheet of Global Publishing at December 31,
2009, appears as follows:
Stockholders’ equity:
5% preferred stock, $100 par,
50,000 shares authorized, ?? shares issued ………………………………………… $1,200,000
Common stock, $2 par, 500,000 shares authorized,
140,000 shares issued, of which ?? are held in treasury ………………………. 280,000
Additional paid-in capital:
From issuance of preferred stock ……………………………………………………… 288,000
From issuance of common stock ………………………………………………………. 840,000
From treasury stock transactions ………………………………………………………. 16,000
From common stock dividends ………………………………………………………… 400,000
Total paid–in capital ………………………………………………………………………. $3,024,000
Retained earnings ($112,000 equal to cost of treasury
stock is not available for dividends)…………………………………………………… 880,000
$3,904,000
Less: Treasury stock (at cost: 14,000 common shares) …………………………. (112,000)
Total stockholders’ equity …………………………………………………………………. $3,792,000
Answer the following questions based on the stockholders’ equity section given above. The
company had no treasury stock purchases before 2009.
1 Refer to the above data. What was the average issue price per share of preferred stock?
a $80. b $100. c $124. d $148.
2 Refer to the above data. How many shares of common stock are outstanding?
a 140,000. b 126,000. c 500,000. d 120,000.
3 Refer to the above data. A small stock dividend of 5,000 shares was declared and
distributed during 2009. What was the market price per share on the date of declaration?
a $82 per share. b $80 per share. c $2 per share. d $78 per share
4 Refer to the above data. If Global Publishing had reacquired 16,000 shares of treasury
stock early in 2009, then some treasury stock must have been sold during 2009 for:
a $5 per share. b $8 per share. c $6 per share. d $16 per share.
5 Refer to the above data. Assume that all remaining treasury stock is reissued at a price of
$18 per share in January of 2010. What amount should be credited to the account
Additional Paid-in Capital: Treasury Stock Transactions in the journal entry to record this
transaction?
a $96,000. b $140,000. c $112,000. d $288,000.
Chapter 12 – Income and Changes in Retained Earnings
CHAPTER 12 NAME #
10-MINUTE QUIZ C SECTION
The stockholders’ equity section of the balance sheet of Xanadu Fashions, Inc., at December
31, 2010 appears as follows:
Stockholders’ equity:
7% preferred stock, $100 par, callable at $105,
50,000 shares authorized, 40,000 shares issued …………………………………. $4,000,000
Common stock, $2 par, 600,000 shares authorized,
450,000 shares issued, of which 30,000 are held in treasury ……………….. 900,000
Additional paid-in capital:
From issuance of preferred stock ……………………………………………………… 640,000
From issuance of common stock ………………………………………………………. 1,890,000
From treasury stock transactions ………………………………………………………. 60,000
From common stock dividends ………………………………………………………… 450,000
Total paid–in capital ………………………………………………………………………. $7,940,000
Retained earnings ($240,000 equal to cost of treasury
stock is not available for dividends)…………………………………………………… 3,600,000
$11,540,000
Less: Treasury stock (at cost: 30,000 common shares) …………………………. (240,000)
Total stockholders’ equity …………………………………………………………………. $11,300,000
Answer the following questions based on the stockholders’ equity section given above. The
company purchased no treasury stock before 2010.
1 Refer to the above data. What was the average issue price per share of preferred stock?
2 Refer to the above data. How many shares of common stock are outstanding?
3 Refer to the above data. A small stock dividend of 20,000 shares was declared and distributed
during 2010. What was the market price per share on the date of declaration?
4 Refer to the above data. If Xanadu Fashions had reacquired 35,000 shares of treasury stock
early in 2010, compute the price per share for which the reissued treasury stock was sold.
5 Refer to the above data. Assume all remaining treasury stock is reissued at a price of $24 per
share in January of 2011. Prepare the journal entry to record this transaction:
Chapter 12 – Income and Changes in Retained Earnings
Financial and Managerial Accounting, 17e 12-9
CHAPTER 12 NAME _________________________________________________ # __________
10-MINUTE QUIZ D SECTION
Shown below is information relating to operations of R. Brook, Inc for the current year:
Continuing operations:
Net sales …………………………………………………………………………………………………… $2,750,000
Costs and expenses (including income taxes) ……………………………………………….. 2,125,000
Other data:
Current-year loss generated by segment of the business
discontinued in July (net of income tax benefit) ………………………………………….. 207,500
Gain on disposal of discontinued segment (net of
income tax) ……………………………………………………………………………………………… 137,500
Prior period adjustment (decrease in prior year’s depreciation
expense, net of income taxes) ……………………………………………………………………. 45,000
Extraordinary loss (net of income tax benefit) ……………………………………………… 17,500
Cash dividends declared ($1.50 per share) …………………………………………………… 150,000
In the space provided, complete the income statement for R. Brook, Inc., including earnings per share
figures. R. Brook, Inc. has 100,000 shares of a single class of common stock outstanding throughout
the year.
R. BROOK, INC.
Condensed Income Statement
For the Year Ended December 31, 2009
Chapter 12 – Income and Changes in Retained Earnings
SOLUTIONS TO CHAPTER 12 10-MINUTE QUIZZES
QUIZ A QUIZ B
QUIZ C
Chapter 12 – Income and Changes in Retained Earnings
Financial and Managerial Accounting, 17e 12–11
QUIZ D
R. BROOK, INC.
Condensed Income Statement
For the Year Ended December 31, 2009
Net sales ……………………………………………………………………………….. $2,750,000
Cost and expenses (including applicable
income taxes) ………………………………………………………………………. (2,125,000)
Income from continuing operations ………………………………………….. $ 625,000
Chapter 12 – Income and Changes in Retained Earnings
Assignment Guide to Chapter 12
Brief
Exercises
Exercises
Problems
Cases
Net
1-10
1-15
2
3
4
5
6
7
8
9
1
2
3
4
5
6
7
Time estimate (in minutes)
<15
<15
40
25
30
30
30
30
30
50
20
20
30
35
60
30
30
Difficulty rating
E
E
M
S
M
M
M
M
M
S
E
M
S
S
S
M
E
Learning Objectives:
1, 2, 3
2, 3, 4, 11,
15
1. Describe how irregular income
items, such as discontinued
operations and extraordinary
items, are presented in the income
statement.
2. Compute earnings per share.
2, 3, 4, 5,
6, 10
3. Distinguish between basic and
diluted earnings per share.
2, 14
4. Account for cash dividends and
stock dividends, and explain the
effects of these transactions on a
company’s financial statements.
4, 7, 8, 9
1, 2, 6, 7,
8, 10, 13
√
√
5. Describe and prepare a statement
of retained earnings.
5, 6
11, 14
√
6. Define prior period adjustments,
and explain how they are presented
in financial statements.
6
2
√
7. Define comprehensive income, and
explain how it differs from net
income.
10
2, 12
8. Describe and prepare a statement
of stockholders’ equity and the
stockholders’ equity section of the
balance sheet.
9
9, 11, 15
√
9. Illustrate steps management might
take to improve the appearance of
the company’s net income.
√