(20-25 min.) E 10-44B
Req. 1
(Thousands)
$3.00 Par
Common
Stock
Additional
Paid In
Capital
Retained
Earnings
Accum. Other
Comprehensive
Income
Total
Shareholders’
Equity
Balance, Dec. 31, 2013 ..
$375
$2,225
$4,200
$12
$6,812
Net earnings ………………
990
990
Other comprehensive
income ……………………
3
3
Issuance of stock ……….
120
240
360
Cash dividends …………..
(69)
(69)
Balance, Dec. 31, 2014 ..
$495
$2,465
$5,121
$15
$8,096
Req. 2
Req. 3
The year was profitable, as indicated by net earnings.
Req. 4
Quiz
Q10–45
a
Q10–46
d
Q10–47
e
Q10–48
c
Q10–49
b
Q10-50
e
Q10-51
a ($313,000 + $260,000 + $81,000 = $654,000)
Q10-52
c ($654,000 + $71,600 − $5,700 = $719,900)
Q10–53
b {($119,300 − $8,100) / [($681,200 + $638,900*) / 2] =
16.8%}
*$719,900 − $81,000 = $638,900
Q10–54
c
Q10–55
d
Q10–56
a
Q10–57
d
Q10–58
b
Q10–59
b (50,000 × $100 × .01 = $50,000)
Q10-60
a [($450,000 − $50,000) / 50,000 = $8.00]
Q10-61
c
Q10-62
d
Q10–63
e
Q10–64
b ($38,000 / $250,000 = 15.2%)
Problems
(30-45 min.) P 10–65A
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Mar.
6
Organization Expense …………………………….
15,600
Common Stock (800 × $8) …………………..
6,400
Paid-in Capital in Excess of
Par – Common ………………………………
9,200
Issued stock to promoter for assisting
with issuance of stock.
9
Cash (35,000 × $23 per share) ………………….
805,000
Common Stock (35,000 × $8) ………………
280,000
Paid-in Capital in Excess of
Par – Common ………………………………
525,000
Issued common stock for cash.
26
Cash (1,400 × $24) …………………………………..
33,600
Common Stock (1,400 × $8) ………………..
11,200
Paid-in Capital in Excess of
Par – Common ………………………………
22,400
Issued common stock for cash.
(continued) P 10-65A
Req. 2
Whitewater Rafts, Inc.
Balance Sheet (partial)
March 31, 2015
Stockholders’ equity:
Common stock, $8 par, 150,000 shares authorized,
37,200* shares issued and outstanding ………………..
$297,600
Paid-in capital in excess of par – common** ……………….
556,600
Retained earnings …………………………………………………….
83,000
Total stockholders’ equity …………………………………….
$937,200
_____
*800 + 35,000 + 1,400 = 37,200 shares
**$9,200 + $525,000 + $22,400 = $556,600
(10-15 min.) P 10-66A
Dorton Corp.
Balance Sheet (partial)
December 31, 2014
Stockholders’ equity:
Preferred stock, 10%, $150 par, 7,500 shares
authorized, 1,950 shares issued and outstanding ………….
$292,500
Common stock, no-par, 700,000 shares
authorized, 171,600 shares issued and outstanding ………
643,000
Retained earnings ……………………………………………………………
101,600
Total stockholders’ equity……………………………………………
$1,037,100
_____
Computations:
Preferred stock: 1,950 × $150 = $292,500
Retained earnings: $74,000 + $129,000 − ($292,500 ×.10 × 2) −
(171,600 × $.25) = $101,600
(25-35 min.) P 10–67A
Req. 1
Whitman Outdoor Furniture Company has Class A cumulative preferred
stock, Class B cumulative preferred stock, and common stock
outstanding.
Req. 2
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Cash ……………………………………………
1,125,000
Class A Preferred Stock ……………
1,125,000
Cash ……………………………………………
1,440,000
Class B Preferred Stock ……………
1,440,000
Cash ($2,450,000 + $4,570,000) ……..
7,020,000
Common Stock …………………………
2,450,000
Additional Paid-in Capital –
Common ………………………………
4,570,000
Req. 3
Whitman Outdoor Furniture would have to pay all preferred dividends in
(continued) P 10-67A
Req. 4
Req. 5
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
2015
Feb.
28
Retained Earnings …………………………………..
825,000
Dividends Payable, Class A
Preferred ($73,125 × 2) …………………….
146,250
Dividends Payable, Class B
Preferred ($93,600 × 2)…………………….
187,200
Dividends Payable, Common ……………….
491,550**
_____
Computations:
* Class A Preferred: 75,000 shares × $15 (par) × 0.065 = $ 73,125
Class B Preferred: 96,000 shares × $15 (par) × 0.065 = 93,600
Total preferred dividends $166,725
**Common dividend: $825,000 − $146,250 − $187,200 = $491,550
(15-20 min.) P 10-68A
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Feb.
13
Cash (6,400 × $10) ……………………………………
64,000
Common Stock (6,400 × $8) …………………
51,200
Paid-in Capital in Excess of Par −
Common ………………………………………..
12,800
June
7
Retained Earnings …………………………………..
450
Dividends Payable (900 × $0.50)…………..
450
24
Dividends Payable …………………………………..
450
Cash ………………………………………………….
450
Aug.
9
Retained Earnings (13,500 × 0.10 × $15) ……
20,250
Common Stock (13,500 × 0.10 × $8) ……..
10,800
Paid-in Capital in Excess of Par −
Common ………………………………………..
9,450
Oct.
26
Treasury Stock (800 × $18) ……………………….
14,400
Cash ………………………………………………….
14,400
Nov.
20
Cash (200 × $20)………………………………………
4,000
Treasury Stock (200 × $18) ………………….
3,600
Paid-in Capital from Treasury
Stock Transactions …………………………
400
Dec.
31
Retained Earnings [(14,850* – 600) × $0.25] .
3,563
Dividends Payable ………………………………
3,563
(continued) P 10-68A
Req. 2
Stockholders’ equity:
$.50 cumulative preferred stock, $20 par, 900
shares issued and outstanding ………………………………………..
$ 18,000
Common stock, $8 par, 14,850 shares issued ($56,800 +
$51,200 + $10,800) and 14,250 shares outstanding ……………
118,800
Paid-in capital in excess of par − common
($17,900 + $12,800 + $9,450) …………………………………………….
40,150
Paid-in capital from treasury stock transactions …………………..
400
Retained earnings ($43,000 + $36,000 − $450 − $20,250 – $3,563) ..
54,737
Less: Treasury stock, 600 shares at cost
($14,400 − $3,600) …………………………………………………….
(10,800)
Total stockholders’ equity ……………………………………………….
$221,287
(20-30 min.) P 10-69A
Req. 1 and 2
ASSETS
=
LIABILITIES
+
STOCKHOLDERS’
EQUITY
CASH FLOW
Feb. 3
$296,000
=
$ 0
+
$296,000
$+296,000
Mar. 19
(67,200)
=
0
+
(67,200)
-67,200
Apr. 24
51,000
=
0
+
51,000
+51,000
Aug. 15
0
=
7,200
+
(7,200)
-0-
Sept. 1
(7,200)
=
(7,200)
+
0
-7,200
Nov. 22
0
=
0
+
0
-0-
(40-50 min.) P 10-70A
Req. 1
Cardinal Designers, Inc.
Balance Sheet
December 31, 2014
ASSETS
LIABILITIES
Current:
Current:
Cash ……………………..
$ 45,000
Accounts payable ……………
$135,000
Accounts rec.,
Accrued liabilities …………..
22,000
net ……………………..
25,000
Dividends payable …………..
9,000
Inventory ……………….
89,000
Total current liabilities ……….
166,000
Prepaid
expenses…………….
14,000
Long-term note payable ………
97,000
Total current assets ….
173,000
Total liabilities ……………………
263,000
Property, plant,
STOCKHOLDERS’
and equipment,
EQUITY
net …………………………
359,000
Common stock,
Intangible assets:
$2 par, 500,000 shares
Goodwill ………………..
18,000
authorized, 110,000
Trademarks, net ……..
9,000
shares issued, 102,000
shares outstanding ………….
$220,000
Paid-in capital in excess of
par – common …………………
53,800
Retained earnings ………………
45,200
Less: Treasury stock,
common, 8,000 shares
at cost …………………………….
(23,000)
Total stockholders’ equity …..
296,000
_______
Total liabilities and
Total assets
$559,000
stockholders’ equity ………..
$559,000
_____
*Retained earnings = Total assets − Total liabilities − Total paid-in capital +
treasury stock = $559,000 − $263,000 − $220,000 − $53,800 + $23,000 = $45,200
(continued) P 10-70A
Req. 2
Net profit
=
Net income
=
$90,000
=
12%
margin
Net sales
$750,000
ratio
Asset
=
Net sales
=
$750,000
=
$750,000
=
1.42
turnover
Average total
($500,000+$559,000)/2
$529,500
assets
Leverage
=
Average total
assets
=
$529,500
=
2.05
ratio
Avg. common
stkholders’ equity
($220,000+$296,000) /2
Net profit
x
Asset
=
margin ratio
turnover
ROA
12%
x
1.42
=
17%
ROA
x
Leverage
=
ROE
ratio
17%
x
2.05
=
34.9%
(continued) P 10-70A
Req. 3
These rates of return suggest strength. The company is generating a
12% net profit margin ratio indicating great effectiveness in achieving
profit goals and most likely some product differentiation. The company
is generating an asset turnover of 1.42, meaning $1.42 in sales for each
(15-20 min.) P 10-71A
Req. 1
Par value of common stock:
$100 million par value
=
$0.50 per
share
200 million shares
issued
Req. 2
(30-45 min.) P 10–72B
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Jan.
6
Organization Expense ………………………………
5,000
Common Stock (200 × $20) …………………..
4,000
Paid-in Capital in Excess of
Par – Common …………………………..……..
1,000
Issued stock to promoter for assistance in
Issuing common stock.
9
Cash (34,000 × $25) …………………………..………
850,000
Common Stock (34,000 × $20) ………………
680,000
Paid-in Capital in Excess of
Par – Common ………………………………….
170,000
Issued common stock for cash.
26
Cash (1,200 × $30) …………………………………….
36,000
Common Stock (1,200 × $20) ………………..
24,000
Paid-in Capital in Excess of
Par – Common …………………………..……..
12,000
Issued common stock for cash.
Req. 2
Cadence Canoes, Inc.
Balance Sheet (partial)
January 31, 2015
Stockholders’ equity:
Common stock, $20 par, 175,000 shares
authorized, 35,400* shares issued and outstanding …..
$708,000
Paid-in capital in excess of par – common ……………………
183,000**
Retained earnings ……………………………………………………….
88,000
Total stockholders’ equity ……………………………………….
$979,000
_____
*200 + 34,000 + 1,200 = 35,400 shares
**$1,000 + $170,000 + $12,000 = $183,000
(10-15 min.) P 10-73B
Lehmann Corp.
Balance Sheet (partial)
December 31, 2014
Stockholders’ equity:
Preferred stock, 6%, $95 par, 15,000 shares authorized,
2,130 shares issued and outstanding ……………………….
$202,350
Common stock, no-par, 725,000 shares authorized,
102,600 shares issued and outstanding…………………….
629,000
Retained earnings ……………………………………………………….
96,378
Total stockholders’ equity ………………………………………..
$927,728
_____
Computations:
(25-35 min.) P 10–74B
Req. 1
Martin Outdoor Furniture Company has Class A cumulative preferred
stock, Class B cumulative preferred stock, and common stock
outstanding.
Req. 2
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Cash …………………………………………..
1,875,000
Class A Preferred Stock ……………
1,875,000
Cash …………………………………………..
2,350,000
Class B Preferred Stock ……………
2,350,000
Cash ($1,340,000 + $4,560,000) ……..
5,900,000
Common Stock ………………………..
1,340,000
Additional Paid-in Capital –
Common ………………………………
4,560,000
Req. 3
(continued) P 10-74B
Req. 4
Req. 5
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
2015
Feb.
28
Retained Earnings …………………………………..
832,000
Dividends Payable, Class A
Preferred ($93,750 × 2). ……………………
187,500
Dividends Payable, Class B
Preferred ($117,500 × 2) …………………..
235,000
Dividends Payable, Common ……………….
409,500**
(15-20 min.) P 10-75B
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Feb.
13
Cash (6,200 × $11) …………………………………….
68,200
Common Stock (6,200 × $8) ………………….
49,600
Paid-in Capital in Excess of Par −
Common …………………………………………..
18,600
June
7
Retained Earnings ……………………………………
320
Dividends Payable
(800 shares × $0.40) ……………………………..
320
24
Dividends Payable ……………………………………
320
Cash ……………………………………………………
320
Aug.
9
Retained Earnings
(12,900 shares × .05 × $15) ………………………..
9,675
Common Stock (12,900 × .05 × $8) ………..
5,160
Paid-in Capital in Excess of Par −
Common …………………………………………..
4,515
Oct.
26
Treasury Stock, Common (200 × $17) ………..
3,400
Cash ……………………………………………………
3,400
Nov.
20
Cash (50 × $19) …………………………………………
950
Treasury Stock, Common (50 × $17) ……..
850
Paid-in Capital from Treasury
Stock Transactions …………………………..
100
Dec.
31
Retained Earnings [(13,545* – 150) x $0.25] ..
3,349
Dividends Payable ……………………………….
3,349
*6,700 + 6,200 + 645 = 13,545 shares issued
(continued) P 10-75B
Req. 2
Stockholders’ equity:
$0.40 cumulative preferred stock, $10 par,
800 shares issued and outstanding …………………………………
$ 8,000
Common stock, $8 par, 13,545 shares issued
($53,600 + $49,600 + $5,160) and 13,395 shares outstanding
108,360
Paid-in capital in excess of par – common
($18,600 + $18,600 + $4,515) …………………………………………….
41,715
Paid-in capital from treasury stock transactions …………………..
100
Retained earnings ($46,000 + $31,000 − $320 − $9,675 − $3,349) …
63,656
Less: Treasury stock, common, 150 shares
at cost ($3,400 − $850) ……………………………………………..
(2,550)
Total stockholders’ equity ……………………………………………….
$219,281