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E8–16
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Common
Paid-In Capital in
Statement
Land*
=
Stock
+
Excess of Par—
Common Stock
E8–17
E8–18
E8–19
d.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Treasury
Paid-In Capital
Statement
Cash
=
Stock
+
from Treasury Stock
E8–20
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Cash Dividends
Retained
Statement
Payable
+
Earnings
July 15. No entry required.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Cash Dividends
Statement
Cash
=
Payable
E8–21
Stockholders’
Assets Liabilities Equity
E8–22
E8–23
Stockholders’ Equity
Paid-in capital:
Common stock, $40 par
(100,000 shares authorized,
E8–24
Stockholders’ Equity
Paid-in capital:
Preferred 2% stock, $80 par
PROBLEMS
P8–1
1. Plan 1 Plan 2 Plan 3
Earnings before interest and income tax ...... $1,000,000 $1,000,000 $1,000,000
Deduct interest on bonds ............................... 0 0 (200,000)
2. Plan 1 Plan 2 Plan 3
3. The principal advantage of Plan 1 is it involves only the issuance of common
stock, which does not require a periodic interest payment or return of
P8–1, Concluded
Plan 2 provides an EPS of $0.16 when earnings before interest and income
P8–2
2.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Employee
FICA
Bond
Group
Statement
Income Tax
Payable
+
Tax
Payable
+
Deduction
Payable
+
Ins.
Payable
+
Salaries
Payable
+
Retained
Earnings
Oct. 4.
17,000
6,750
2,000
6,000
58,250*
(90,000)
Oct. 4.
P8–2, Concluded
4.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
FICA Tax
SUTA
FUTA
Retained
Statement
Payable
+
Payable
+
Payable
+
Earnings
P8–3
1.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Statement
2.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Retained
Statement
Cash
=
Earnings
3.
Balance Sheet
Statement of
Assets
=
Liabilities
+
Stockholders’ Equity
Income
Cash Flows
Statement
Cash
=
Bonds Payable
4. The bonds would have sold at a premium since the market rate of interest
