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14-21 Solutions
Solutions 14-22
14.25 continued.
d. Land .......................................................................... 540,000
Treasury Stock—Common [= (4,000 X $12) +
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+540,000
+348,000
ContriCap
+30,000
ContriCap
+162,000
ContriCap
14.26 (Treatment of accounting errors, changes in accounting principles, and
changes in accounting estimates.)
(1) Accounting Error:
(2) Change in Accounting Principle:
(3) Change in Accounting Estimate:
14.27 (Uncertainty Corporation; journal entries to correct errors and adjust for
changes in estimates.)
a. Retained Earnings ..................................................... 12,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
–12,000
–12,000
R E
To correct error from neglecting to amortize patent
during previous year.
14-23 Solutions
14.27 continued.
b. Accumulated Depreciation ........................................ 7,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+7,000
+4,000
R E
+3,000
R E
To correct error in recording the sale of a machine by
eliminating the balance in accumulated depreciation
relating to the machine sold and converting a $4,000
loss on the sale to a $3,000 gain.
c. Depreciation Expense ............................................... 50,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
–50,000
–50,000
IncSt → RE
To record depreciation expense for 2008. Carrying
d. Bad Debt Expense .................................................... 10,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
–10,000
–10,000
IncSt → RE
To adjust the balance in the allowance account to the
amount needed to cover estimated uncollectibles.
14.28 (Journal entries to record the issuance of capital stock.)
a. Cash (= 50,000 X $30) .............................................. 1,500,000
Solutions 14-24
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+1,500,000
+250,000
ContriCap
+1,250,000
ContriCap
14-25 Solutions
14.28 continued.
b. Cash (= 20,000 X $100) ............................................ 2,000,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+2,000,000
+2,000,000
ContriCap
c. Patent (= 16,000 X $15) ............................................ 240,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+240,000
+160,000
ContriCap
+80,000
ContriCap
d. Convertible Preferred Stock ...................................... 400,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
–400,000
ContriCap
+25,000
ContriCap
+375,000
ContriCap
e. Compensation Expense (= 5,000 X $12) ................... 60,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
–60,000
IncSt → RE
+50,000
ContriCap
+10,000
ContriCap
Solutions 14-26
14.29 (Journal entries for the issuance of common stock.)
a. Inventory ................................................................... 175,000
Land .......................................................................... 220,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+175,000
+200,000
ContriCap
+220,000
+2,000,000
ContriCap
+1,400,000
+405,000
b. Cash (= 10,000 X $100) ............................................ 1,000,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+1,000,000
+1,000,000
c. Cash (= 5,000 X $24) ................................................. 120,000
Additional Paid-in Capital (Common Stock War-
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+120,000
–40,000
ContriCap
+5,000
ContriCap
+155,000
ContriCap
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
–500,000
ContriCap
+200,000
ContriCap
14-27 Solutions
+300,000
ContriCap
Solutions 14-28
14.30 (Wilson Supply Company; transactions to incorporate and run a business.)
a. 1/02
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+9,000
+9,000
ContriCap
300 shares X $30 = $9,000.
b. 1/06
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+60,000
+60,000
ContriCap
2,000 shares X $30 = $60,000.
c. 1/08
Cash .......................................................................... 400,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+400,000
+400,000
ContriCap
d. 1/09
No entry.
14-29 Solutions
14.30 continued.
e. 1/12
Inventories................................................................. 50,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+50,000
+100,000
ContriCap
+80,000
+360,000
ContriCap
+210,000
+120,000
f. 7/03
Retained Earnings (Dividends Declared) .................. 20,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+20,000
–20,000
R E
$100 X (.08/2) X (4,000 + 1,000) shares = $20,000.
g. 7/05
Cash .......................................................................... 825,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+825,000
+750,000
ContriCap
+75,000
ContriCap
h. 7/25
Solutions 14-30
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
–20,000
–20,000
14-31 Solutions
14.30 continued.
i. 10/02
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+39,300
–39,300
R E
$1 X (300 + 2,000 + 12,000 + 25,000) shares = $39,300.
j. 10/25
Dividends Payable on Common Stock ...................... 39,300
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
–39,300
–39,300
14.31 (Fisher Company; reconstructing transactions involving shareholders' equity.)
a. $60,000 par value/$10 per share = 6,000 shares.
d. If the Additional Paid-in Capital is $31,440, then $30,000 [= 6,000 X ($15 –
$10)] represents contributions in excess of par value on original issue of
The shares were reissued for $26 each.
Solutions 14-32
14.31 continued.
e. (1) Cash (= 6,000 X $15) ........................................ 90,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+90,000
+60,000
ContriCap
+30,000
ContriCap
(2) Treasury Stock—Common ................................ 12,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
–12,000
–12,000
ContriCap
(3) Cash (= 240 X $26) ........................................... 6,240
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+6,240
+4,800
ContriCap
+1,440
ContriCap
(4a) Cash .................................................................. 10,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+10,000
+4,000
IncSt → RE
–6,000
(4b) Securities Available for Sale ............................. 2,000
Unrealized Holding Gain on Securities
14-33 Solutions
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+2,000
+2,000
OCInc →
AOCInc
Solutions 14-34
14.31 continued.
f. The realized gain appears in the income statement and the unrealized
14.32 (Shea Company; reconstructing transactions involving shareholders' equity.)
a. $100,000 par value/$5 per share = 20,000 shares.
d. If the Additional Paid-in Capital is $509,600, then $500,000 [= 20,000 X
($30 – $5)] represents contributions in excess of par value on original
The $9,600 represents 800 shares reissued times the excess of
reissue price over acquisition price:
e. (1) Cash .................................................................. 600,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+600,000
+100,000
ContriCap
+500,000
ContriCap
(2) Treasury Shares ................................................ 56,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
–56,000
–56,000
ContriCap
14-35 Solutions
Solutions 14-36
14.32 e. continued.
(3) Cash .................................................................. 32,000
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+32,000
+22,400
ContriCap
+9,600
ContriCap
800 X $40 = $32,000.
800 X $28 = $22,400.
(4a) Cash .................................................................. 12,000
Realized Loss on Sale of Securities Available
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+12,000
–2,000
IncSt → RE
–14,000
(4b) Unrealized Holding Loss on Securities Avail-
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
–7,000
–7,000
OCInc →
AOCInc
Write down securities from $25,000 to $18,000.
f. The realized loss appears in the income statement and the unrealized loss
14.33 (Lowe Corporation; accounting for stock options.)
Compensation expense reduces net income each year as follows:
2008: zero compensation because all benefits occur after the granting of the
stock option.
14.34 (Procter & Gamble Company; accounting for stock options.)
Compensation expense reduces net income each year as follows:
2004: [.5(35,759 X $10.99) + .5(40,866 X $12.50)] = $451,908.21
14.35 (Microsoft Corporation; reconstructing transactions affecting shareholders’
equity.) (Amounts in Millions)
(1) Cash ......................................................................... 6,763
Assets
=
Liabilities
+
Shareholders'
Equity
(Class.)
+6,763
+6,763
ContriCap
To issue common stock for cash.
(2) Common Stock and Additional Paid-in Capital ......... 6,162
Solutions 14-38
–21,212
R E
To repurchase common stock for more than its initial
issue price.
