E11–11
Req. 1
(a) Dividends …………………………..…………………………..….
100,000
Dividends Payable …………………………..……………….
100,000
Declaration of preferred dividends.
Dividends Payable ………………………………………………
100,000
Cash …………………………..…………………………..……..
100,000
Payment of preferred dividends.
(b) Dividends …………………………..…………………………..….
400,000
*
Dividends Payable …………………………..……………….
400,000
Declaration of common dividends.
Dividends Payable ………………………………………………
400,000
*
Cash …………………………..…………………………..……..
400,000
Payment of common dividends.
*Dividends paid = shares outstanding x dividend rate
Shares issued ……………….….
300,000
Treasury stock ………………….
100,000
Shares outstanding ………..….
200,000
Dividend rate ………………..….
$2 per share
Dividends paid ………………….
$400,000
Req. 2
SNEER CORPORATION
Statement of Retained Earnings
For the Year Ended December 31
Retained Earnings, January 1
$ 800,000
Net income
300,000
Dividends on preferred stock
(100,000)
Dividends on Common Stock
(400,000)
Retained Earnings, December 31
$ 600,000
Req. 3
Retained Earnings …………………………..………………..…………
500,000
Dividends ……………………………………………………….
500,000
E11–12
Stockholders’ Equity
Req. 1
Before
After
Stock
Stock
Stock
Dividend
Dividend
Dividend
Contributed Capital
Common Stock, par $10, auth. 60,000 shares
$ 250,000
$ 30,000
$ 280,000
Additional Paid-in Capital
12,000
24,000
36,000
262,000
54,000
316,000
Retained Earnings
75,000
(54,000)
21,000
Total Stockholders’ Equity
$ 337,000
$ –
$ 337,000
Computations
Number of shares issued as small stock dividend = 12% x 25,000 shares = 3,000 additional shares
$30,000 Common Stock effect = 3,000 shares x $10 par
$24,000 APIC effect = 3,000 shares x ($18 market value – $10 par) = 3,000 x $8
$54,000 Retained Earnings effect = 3,000 shares x $18 market value per share
E11–13
Req. 1
February 18, 2014:
Dividends ……………………………………………………….….……..
77,500,000
Dividends Payable …………………………………………………..
77,500,000
155,000,000 shares x $0.50 = $77,500,000
March 5, 2014:
Date of record – No journal entry required.
March 18, 2014:
Dividends Payable …………………………..…………………..……..
77,500,000
Cash …………………………..…………………………..……..……..
77,500,000
Req. 2
Retained Earnings …………………………..………………..…………
77,500,000
Dividends ……………………………………………………….
77,500,000
E11–14
Case 1
Case 2
Items
Before Stock
Transactions
After 100%
Stock
Dividend
After Stock
Split
Number of shares
outstanding
100,000
200,000
200,000
Par per share
$ 1
$1
$0.50
Common Stock
$100,000
$ 200,000
$ 100,000
Additional Paid-in Capital
90,000
90,000
90,000
Retained Earnings
170,000
70,000
170,000
Total Stockholders’ Equity
$ 360,000
$ 360,000
$ 360,000
Case 1: The 100% stock dividend is a large stock dividend, which is recorded at the par
Case 2: The stock split did not change any account balances; its only effects were to (1)
double the shares outstanding and (2) decrease par value per share from $1.00 to
$0.50.
Note: Neither of the cases changed total stockholders’ equity ($360,000) because they
E11–15
(a) February 1
Dividends ……………………………………………………….….……..
40,000
Dividends Payable …………………………………………………..
40,000
Dividends Payable …………………………..…………………..……..
40,000
Cash …………………………..…………………………..……..……..
40,000
(c) June 30
Retained Earnings …………………………..………………..…………
40,000
Dividends ……………………………………………………….
40,000
E11–16
Req. 1 BLAKE CORPORATION
Statement of Retained Earnings
For the Year Ended December 31
Retained Earnings, January 1
$ 76,000
Net Income
48,000
Dividends
(28,000)
Retained Earnings, December 31
$ 96,000
BLAKE CORPORATION
Balance Sheet (Excerpt)
Stockholders’ Equity—December 31
Contributed Capital:
Common Stock, par $15, authorized 100,000 shares, issued
35,000 shares, of which 1,000 shares are held as treasury stock ……
$525,000
Additional Paid-in Capital – Common Stock …………………………..………
180,000
Total Contributed Capital ………………………………………………………...
705,000
Retained Earnings …………………………..…………………………..……………….
96,000
Total …………………………..…………………………..…………………………....
801,000
Less: Treasury Stock, at cost …………………………..………………………….
(20,000)
Total Stockholders’ Equity …………………………..……………………….
$781,000
Req. 2
Treasury stock does not receive dividends. As a result, dividends should be paid on
34,000 shares (35,000 – 1,000).
E11–16 (continued)
Req. 3
ROE
=
Net Income
Average Stockholders’ Equity
=
$48,000
=
6.8%
($629,000 + $781,000) ÷ 2
E11–17
Req. 1
Earnings per share = Net Income ÷ Weighted Average # of Shares Outstanding
= $5,000 ÷ 50,000 = $0.10
Return on equity = Net Income ÷ Average Stockholders’ Equity
= $5,000 ÷ ($100,000 + $100,000)/2 = 0.050 or 5.0%
Req. 2
E11–18
Req. 1
Case A: Sole Proprietorship, closing entries:
Individual revenue accounts …………………………..………….
150,000
Individual expense accounts …………………………..…….
130,000
Proprietor A, Capital …………………………..………………..
20,000
Proprietor A, Capital …………………………..……………………
8,000
Proprietor A, Drawings ………………………………………….
8,000
Case B: Partnership, closing entries:
Individual revenue accounts …………………………..………….
150,000
Individual expense accounts …………………………..…….
130,000
Partner A, Capital …………………………..……………………
10,000
Partner B, Capital …………………………..……………………
10,000
Partner A, Capital ……………………………………………………
5,000
Partner B, Capital ……………………………………………………
9,000
A, Drawings …………………………..…………………………...
5,000
B, Drawings …………………………..…………………………...
9,000
Case C: Corporation, closing entry:
Individual revenue accounts …………………………..………….
150,000
Individual expense accounts …………………………..…….
130,000
Retained Earnings ………………………………………………
20,000
Req. 2
Case A: Sole Proprietorship
A, Capital, December 31 …………………………..…………………..
$62,000
Case B: Partnership
Partners’ Equity
A, Capital ……………………………………………………….…………..
$45,000
B, Capital ……………………………………………………….…………..
39,000
Total Partners’ Equity …………………………..……………………
$84,000
E11–18 (continued)
Case C: Corporation
Stockholders’ Equity
Contributed Capital:
Capital Stock, par $10, authorized 30,000 shares,
outstanding 15,000 shares …………………………..…………..
$150,000
Additional Paid-in Capital …………………………..………………
5,000
Total Contributed Capital …………………………..……………
155,000
Retained Earnings …………………………..…………………………...
85,000
Total Stockholders’ Equity …………………………..……….
$240,000
Computations:
Case A: Statement of Owner’s Equity
A, Capital, January 1 …………………………..………………………..
$50,000
Net Income …………………………..…………………………..…………
20,000
Total ……………………………………………………….………………
70,000
Withdrawals…………………………..…………………………..………..
8,000
A, Capital, December 31 …………………………..…………………..
$62,000
Case B:
Statement of Partners’ Equity
A
B
Total
Partners’ Equity, January 1 ………………………….
$40,000
$38,000
$78,000
Net Income …………………………..……………………
10,000
10,000
20,000
Total ……………………………………………………..
50,000
48,000
98,000
Withdrawals…………………………..…………………..
(5,000)
(9,000)
(14,000)
Partners’ Equity, December 31 …………………….
$45,000
$39,000
$84,000
Case C:
Statement of Retained Earnings
Retained Earnings, Jan. 1 ……………………………………………………….……..
$65,000
Net Income …………………………..…………………………..…………………………
20,000
Retained Earnings, Dec. 31 …………………………..…………………………..…..
$85,000
E11–19
(a) Retained Earnings (25,000 x 0.12 x $18)……………………
54,000
Common Stock (25,000 x 0.12 x $10 par) ………………..
30,000
Additional Paid-In Capital, Common Stock ………………
24,000
(b) Retained Earnings (25,000 x 100% x $10) …………………
250,000
Common Stock …………………………..……………………….
250,000
ANSWERS TO COACHED PROBLEMS
CP11–1
Req. 1
Assets
Liabilities
Stockholders’ Equity
a.
Cash +720,000
NE
Common Stock +600,000
Additional Paid-in Capital-Common +120,000
b.
Cash –30,000
NE
Treasury Stock (+xSE) –30,000
c.
Cash +18,000
NE
Treasury Stock (–xSE) +15,000
Additional Paid-in Capital-Treasury +3,000
Req. 2
(a)
Cash …………………………..…………………………..……..…………
720,000
Common Stock …………………………………………….…………
600,000
Additional Paid-in Capital, Common Stock ……….…………
120,000
(b)
Treasury Stock …………………………..…………………………..
30,000
Cash …………………………..…………………………..….…………
30,000
(c)
Cash …………………………..…………………………..……..…………
18,000
Treasury Stock …………………………..………………..…………
15,000
Additional Paid-in Capital, Treasury Stock ………..…………
3,000
Req. 3 Stockholders’ Equity—December 31
Contributed Capital:
Common Stock, par $10, authorized 200,000 shares; issued 60,000
shares, of which 1,000 shares are held as treasury stock ……………………
$600,000
Additional Paid-in Capital, Common …………………………..………………………
120,000
Additional Paid-in Capital, Treasury …………………………..………………………
3,000
Total Contributed Capital …………………………..…………………………..……..
723,000
Retained Earnings …………………………..…………………………..……………………..
38,200
Total …………………………..…………………………..…………………………..……..
761,200
Less: Treasury Stock, at cost* …………………………..…………………………..….
(15,000)
Total Stockholders’ Equity …………………………..…………………………..……
$746,200
* ($15,000 = 1,000 shares x $15)
CP11–2
Req. 1
The 100% stock dividend would be classified as a large stock dividend, which means
the company would move $600 (the par value of the distributed stock = 600 million
shares x $0.000001 par value) out of Retained Earnings and into Common Stock. This
CP11–3
Req. 1.
Shares authorized (given) …………………………..…………………………..………
500,000
Shares issued ($200,000 $1) ……………………………………………………….
200,000
Shares outstanding (200,000 – 3,000) …………………………..…………….……
197,000
Req. 2.
Additional paid-in capital: ($22 per share – $1 par value) x 200,000 shares
=$4,200,000.
Req. 3.
Earnings per share: $147,750 197,000 shares = $0.75.
Note: As stated in the provided data, no changes in Common Stock occurred
Req. 4.
Dividends per share: $49,250 197,000 shares = $0.25.
Req. 5.
Req. 6.
Par value per share after the 2-for-1 split, $1 2 = $0.50.