PB11–4
Case A—Preferred is noncumulative (total amount to distribute, $24,000):
Preferred
(19,000
shares)
Common
(490,000
shares)
Total
Preferred ($190,000 x 8%) …………………………..………….
$15,200
$15,200
Balance to common ($24,000 – $15,200) ………………….
$8,800
8,800
$15,200
$8,800
$24,000
Per share ……………………………………………………….…….
$.80
$.02 (rounded)
Case B—Preferred is cumulative (total amount to distribute, $24,000):
$24,000
$24,000
–0–
–0–
–0–
–0–
$24,000
–0–
$24,000
$1.26
$ –0–
Note: $6,400 of dividends in arrears ($30,400-$24,000) will carry-over to the next year
along with $15,200 from the current year.
Case C—Preferred is cumulative (total amount to distribute, $67,000):
$30,400
$30,400
15,200
15,200
$21,400
21,400
$45,600
$21,400
$67,000
$2.40
$.04 (rounded)
PB11–5
Req. 1
Urban Youth
Sound Jonx
ROE =
Net Income
$27,500
$41,500
Average
($300,399 + $387,101) ÷ 2
($521,198 + $516,302) ÷ 2
Stockholders’
Equity
=
0.08
or
8.0%
=
0.08
or
8.0%
Urban Youth
Sound Jonx
P/E =
Stock Price
$20.35
$16.15
EPS
$1.10
$0.95
=
18.5
17
Investors appear to value Urban Youth more because they are willing to pay 18.5 times
ANSWER TO COMPREHENSIVE PROBLEM
C11–1
Req. 1
Assets
Liabilities
Stockholders’ Equity
1/15
Cash +50,000
NE
Common Stock +5,000
Additional Paid-in Capital +45,000
2/15
Cash –33,000
NE
Treasury Stock (+xSE) –33,000
3/15
Cash +24,000
NE
Treasury Stock (–xSE) +22,000
Additional Paid-in Capital +2,000
8/15
Cash +4,600
NE
Treasury Stock (–xSE) +6,600
Additional Paid-in Capital –2,000
9/15
NE
Dividends
Payable +14,600
Dividends (+D) –14,600
10/1
Cash +101,000
Bonds Payable
+100,000
Premium on
Bonds Payable
+1,000
10/3
AR –500
AFDA* +500
Commented [JPW3]: I did not see where problem in text
request depreciation adjusting entry to be made.
C11–1 (continued)
Req. 2
Jan 15
Cash ……………………………………………………….……..…………
50,000
Common Stock …………………………………………….…………
5,000
Additional Paid-in Capital, Common Stock ……….…………
45,000
Feb 15
Treasury Stock …………………………..…………………………..
33,000
Cash …………………………..…………………………..….…………
33,000
Mar 15
Cash ……………………………………………………….……..…………
24,000
Treasury Stock …………………………..………………..…………
22,000
Additional Paid-in Capital, Treasury Stock ……….…………
2,000
Dividends …………………………..…………………………..
14,600
Dividends Payable ……………………………………….…………
14,600
Cash ……………………………………………………….……..…………
Premium on Bonds Payable …………………………..
1,000
Allowance for Doubtful Accounts ………………………..…
C11–1 (continued)
Req.3
Cash (A)
Accounts Receivable (A)
Bal.
01/15
03/15
08/15
10/01
10,000
50,000
24,000
4,600
101,000
33,000 02/15
Bal.
5,000
500
10/03
156,600
4,500
Allowance for Doubtful
Accounts (xA)
Buildings (A)
10/03
500
2,000
Bal.
Bal.
247,000
1,500
247,000
0
Bal.
5,000
15,000
02/15
33,000
22,000
6,600
03/15
08/15
1,000
30,000
Bal.
30,000
14,600
Notes Payable (L)
10,000
Bal.
10,000
Bonds Payable (L)
0
100,000
Bal.
10/01
100,000
Premium on Bonds Payable
(-L)
0
1,000
Bal.
10/01
C11–1 (continued)
Req. 4 Liabilities (excerpt)
Noncurrent Liabilities:
Notes Payable
Bonds Payable
Premium on Bonds Payable
Total Noncurrent Liabilities
Stockholders’ Equity
$ 10,000
100,000
1,000
111,000
Contributed Capital:
Common Stock, par $1, issued 15,000 shares, of which 400 shares are
held as treasury stock …………………………..…………………………..…………..
15,000
Additional Paid-in Capital …………………………..…………………………..………..
135,000
Total Contributed Capital …………………………..…………………………..……..
150,000
Retained Earnings* …………………………..…………………………..……………………
125,400
Total …………………………..…………………………..…………………………..……..
275,400
Less: Treasury Stock, at cost …………………………..…………………………..…..
(4,400)
Total Stockholders’ Equity …………………………..…………………………..……
271,000
* ($125,400 = $120,000 Beginning + $20,000 NI – $14,600 Dividends)
Req. 5
Dec 31
Retained Earnings ………………………………………………………
14,600
Dividends …………………………..……………………….….
14,600
C11–2
Part A
Req. 1
1)
Salaries and Wages Payable
1,600
Cash
1,600
2)
Vehicles
10,000
Cash
10,000
3)
Withheld Income Taxes Payable
500
FICA Payable
600
Cash
1,100
4)
Dividends
3,075
Dividends Payable
3,075
($13,300 total par value /$2 par = 6,650 shares issued – 500 in treasury
= 6,150 common shares outstanding x $0.50 per share = $3,075 total)
5)
Allowance for Doubtful Accounts
950
Accounts Receivable
950
6)
Accounts Receivable ($26,250 + $1,575)
27,825
Sales Revenue ($150 x 175 units)
26,250
Sales Tax Payable ($26,250 x 0.06)
1,575
Cost of Goods Sold
11,725
Inventory
11,725
($12,060/180 units = $67 per unit x 175 units delivered = $11,725)
7)
Sales Tax Payable
500
Cash
500
8)
Cash
2,400
Treasury Stock (300 shares x $8 ea.)
2,400
9)
Cash
8,500
Accounts Receivable
8,500
10)
Dividends Payable
3,075
Cash
3,075
11)
Inventory
4,410
Accounts Payable
4,410
C11–2 (continued)
Req. 1 (continued)
12)
Depreciation Expense
200
Accumulated Depreciation–Equipment
200
[($25,000 – $1,000)/5 years = $4,800 per year x 0.5/12 months = $200)
Cash
23,000
Accum. Depn.–Equip. ($2,400+$200)
2,600
Equipment
25,000
Gain on Disposal [$23,000 – ($25,000 – $2,600)]
600
13)
Salaries and Wages Expense
2,000
Payroll Tax Expense ($150 + $50)
200
Withheld Income Taxes Payable
250
FICA Payable ($150 employee + $150 employer)
300
Unemployment Tax Payable
50
Cash ($2,000 gross pay – $250 inc. tax – $150 FICA)
1,600
14)
Note Payable
22,000
Interest Payable
495
Interest Expense ($22,000 x 0.09 x 1/12 x 17/31) 90
Cash
22,585
15)
Accounts Receivable ($4,500 + $270)
4,770
Sales Revenue ($150 x 30 units)
4,500
Sales Tax Payable ($4,500 x 0.06)
270
Cost of Goods Sold
1,910
Inventory
1,910
{[$12,060/180 units x (180 – 175 units)] + ($4,410/70 units x 25 units)}
16)
Unearned Revenue
3,750
Sales Revenue ($150 x 25 units)
3,750
Cost of Goods Sold
1,575
Inventory ($4,410/70 units x 25 units)
1,575
17)
Cash
81,420
Discount on Bonds Payable (+xL)
8,580
Bonds Payable
90,000
C11–2 (continued)
Req. 1 (continued)
18)
Depreciation Expense
380
Accumulated Depreciation–Vehicles
380
[($10,000 – $0)/50,000 miles x 1,900 miles)
19)
Bad Debt Expense
693
Allowance for Doubtful Accounts
693
[($8,250-$950+$27,825-$8,500+$4,770) x 0.02
= $628 desired – ($885-$950) unadjusted = $693]
20)
Rent Expense
1,600
Prepaid Rent
1,600
21)
Salaries and Wages Expense
2,000
Payroll Tax Expense ($150 + $50)
200
Withheld Income Taxes Payable
250
FICA Payable ($150 employee + $150 employer)
300
Unemployment Tax Payable
50
Salaries and Wages Payable
1,600
22)
Income Tax Expense
3,750
Income Tax Payable
3,750
C11–2 (continued)
Req. 2
Allowance for Doubtful
Beg. 19,500
Beg. 8,250
885 Beg.
Beg. 12,060
8. 2,400
9. 8,500
12. 23,000
17. 81,420
1,600 1.
10,000 2.
1,100 3.
500 7.
3,075 10.
1,600 13.
22,585 14.
6. 27,825
15. 4,770
950 5.
8,500 9.
5. 950
693 19.
11. 4,410
11,725 6.
1,910 15.
1,575 16.
Bal. 94,360
Bal. 31,395
628 Bal.
Bal. 1,260
Prepaid Rent (A)
Equipment (A)
Vehicles (A)
Accum. Depn.-Equip. (xA)
Beg. 1,600
Beg.25,000
Beg. 0
2,400 Beg.
1,600 20.
25,000 12.
2. 10,000
12. 2,600
200 12.
Bal. 0
Bal. 0
Bal. 10,000
0 Bal.
Accum. Depn.-Vehic. (xA)
0 Beg.
380 18.
380 Bal.
Accounts Payable (L)
Sales Tax Payable (L)
FICA Payable (L)
Withheld Inc. Tax. Pay. (L)
0 Beg.
500 Beg.
600 Beg.
500 Beg.
4,410 11.
7. 500
1,575 6.
270 15.
3. 600
300 13.
300 21.
3. 500
250 13.
250 21.
4,410 Bal.
1,845 Bal.
600 Bal.
500 Bal.
Salaries/Wage Pay. (L)
Unemploy. Tax Pay. (L)
Interest Payable (L)
Note Payable (L)
1,600 Beg.
300 Beg.
495 Beg.
22,000 Beg.
1. 1,600
1,600 21.
50 13.
14. 495
14. 22,000
1,600 Bal.
50 21.
0 Bal.
0 Bal.
400 Bal.
Unearned Revenue (L)
Income Tax Pay. (L)
16. 3,750
4,500 Beg.
0 Beg.
3,750 22.
750 Bal.
3,750 Bal.