Chapter 11 – Reporting and Analyzing Equity
Problem 11-2B (Concluded)
Part 2
BALTHUS CORP.
Statement of Retained Earnings
For Year Ended December 31, 2014
Retained earnings, December 31, 2013 ……………………….
$2,160,000
Plus net income ………………………………………………………...
1,072,000
3,232,000
Less: Cash dividends declared ………………………………….
(740,000)
Treasury stock reissuances ……………………………..
(16,000)
Retained earnings, December 31, 2014 ……………………….
$2,476,000
Part 3
BALTHUS CORP.
Stockholders’ Equity Section of the Balance Sheet
December 31, 2014
Common stock⎯$1 par value, 320,000 shares
authorized, 200,000 shares issued and outstanding ….
$ 200,000
Paid in capital in excess of par value, common stock …
1,400,000
Retained earnings (from part 2) ………………………………………
2,476,000
Total stockholders’ equity ………………………………………….
$4,076,000
Problem 11-3B (45 minutes)
Part 1 Explanations for each of the journal entries
Jan. 17
Declared a cash dividend of $1 per share of common stock.
($96,000 / 96,000 shares)
Feb. 5
Paid the cash dividend on common stock.
Feb. 28
Declared a 12.5% stock dividend when the market value is $21 per
share. ($120,000 / $10 par = 12,000 shares = 12.5% of 96,000
shares; $252,000 / 12,000 shares = $21 per share)
Mar. 14
Distributed the common stock dividend.
Mar. 25
Executed a 2-for-1 stock split. ($10 par / $5 par = 2-for-1 ratio)
Mar. 31
Closed the Income Summary account to Retained Earnings.
Part 2
Jan. 17
Feb. 5
Feb. 28
Mar. 14
Mar. 25
Mar. 31
Common stock ……………..
$ 960,000
$ 960,000
$ 960,000
$1,080,000
$1,080,000
$1,080,000
Common stock
dividend distributable ….
0
0
120,000
0
0
0
Paid–in capital in
excess of par………………..
384,000
384,000
516,000
516,000
516,000
516,000
Retained earnings ………...
1,504,000
1,504,000
1,252,000
1,252,000
1,252,000
1,972,000
Total equity …………………….
$2,848,000
$2,848,000
$2,848,000
$2,848,000
$2,848,000
$3,568,000
Problem 11-5B (40 minutes)
1. Market price = $90 per share (current stock exchange price given)
2. Computation of stock par values
3. Book values with no dividends in arrears
Book value per preferred share = par value (when not callable)
= $ 250
Common stock
Total equity…………………………..……………
$2,400,000
Less equity for preferred ……………………
(375,000)
Common stock equity ……………………..…
$2,025,000
Number of outstanding shares ………..…
18,000
Book value per common share ………..…
$ 112.50
($2,025,000 / 18,000)
4. Book values with two years’ dividends in arrears
Preferred stock
Preferred stock par value …………………..
$ 375,000
Plus two years’ dividends in arrears* ....
60,000
Preferred equity ………………………………...
$ 435,000
*2 years’ dividends = 2 x ($375,000 x 8%) = $60,000
Number of outstanding shares …………..
1,500
Book value per preferred share ………....
$ 290.00
($435,000 / 1,500)
Common stock
Total equity…………………………..…………...
$2,400,000
Less equity for preferred …………………...
(435,000)
Common stock equity ………………………..
$1,965,000
Number of outstanding shares …………..
18,000
Book value per common share …………..
$ 109.17
($1,965,000 / 18,000) rounded
