Exercise 18–22
The FASB Accounting Standards Codification represents the single source of
authoritative U.S. generally accepted accounting principles. The specific citation
for each of the following items is:
1. Disclosure for the pertinent rights and privileges of the various securities
outstanding:
2. Requirement to record a “small” stock dividend at the fair value of the
shares issued:
Another citation that describes what qualifies as a small stock dividend is
3. Requirement to exclude from the determination of net income gains and
losses on transactions in a company’s own stock:
Exercise 18–23
Requirement 1
a. March 3—declaration date
Investment in Leasco International stock ……………………. 20,000
March 15—date of record
no entry
March 31—payment date
b. May 3
*alternatively, retained earnings may be debited.
c. July 5
Exercise 18–23 (continued)
d. December 1—declaration date
Retained earnings…………………………………………………….. 7,920
e. December 1—declaration date
December 20—date of record
no entry
December 28—payment date
Exercise 18–23 (concluded)
Requirement 2
CONSOLIDATED PAPER, INC.
[Shareholders’ Equity section]
December 31, 2018
Paid-in capital:
Preferred stock, 8.8%, 90,000 shares at $1 par $ 90,000
Exercise 18–24
Requirement 1
The return on shareholders’ equity is computed by dividing net income by
average shareholders’ equity.
* Increase in retained earnings, which equals
net income since no dividends were paid.
Requirement 2
The ratio is a summary measure of profitability often used by investors and
However, because shareholders’ equity is a measure of the book value of
Exercise 18–25
Indicate by letter whether each of the terms or phrases listed below is more associ-
ated with financial statements prepared in accordance with U.S. GAAP (U) or In-
ternational Financial Reporting Standards (I).
Terms and phrases
U 1. Common stock
I 2. Preference shares
U 3. Liabilities often listed before Equity in the balance sheet (statement of fi-
nancial position)
Problem 18–1
PART A
Jan. 9
($ in millions)
Cash (40 million shares x $20 per share)………………………………… 800
Mar. 11
Problems
Equipment (5,000 shares x $20 per share)…………………….. 100,000
PART B
Jan. 12
($ in millions)
Note: Donated assets are recorded as revenue at the fair value of the assets received, not
paid-in capital. This is discussed in Chapter 10.
Sept. 1
($ in millions)
Common stock (2 million shares x $1 par)……………………………. 2
Paid-in capital—excess of par
Dec. 1
($ in millions)
Cash……………………………………………………………………………. 26
Problem 18–2
Requirement 1
a. February 5, 2018
($ in millions)
c. November 14, 2020
Retirement Treasury Stock
Common stock (6 million sh. x $1) 6 Treasury stock (6 million sh. x $10) 60
Paid-in capital—excess of par Cash
60
4
Problem 18–2 (concluded)
Requirement 2
Shareholders’ Equity $ in millions
Treasury
Retirement Stock
Paid-in capital:
Common stock, $1 par, ………………………………………….. $ 238 $ 240
Retained earnings………………………………………………… 1,089 ** 1,099
***
or, alternatively:
Paid-in capital:
Cash (2 million sh. x $7) 14 Cash (2 million sh. x $7) 14
20
***
* $1,680 – 42 + 22 + 12
** $1,100 – 11
*** $1,100 – 1