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Exercise 10-15 (LO 10-8)
Requirement 1
Requirement 2
Requirement 3
($ in millions)
Net
Income
÷
Shares Outstanding
=
Earnings per Share
Friendly Fashions
$312
÷
675
=
$0.46
Requirement 4
Exercise 10-16 (LO 10-8)
Requirement 1
($ in millions)
Net Income
Minus
Preferred
Dividends
÷
Average Shares
Outstanding
=
Earnings per Share
Requirement 2
($ in millions)
Stock Price
÷
Earnings Per Share
=
Price-Earnings
Ratio
2020
$10.97
÷
$0.7325
=
$14.98
Exercise 10-17
Requirement 1
January 2
Debit
Credit
Cash
40,000
Common Stock
2,000
Additional Paid-in Capital
38,000
(Issue common stock)
January 12
Debit
Credit
Treasury Stock
18,000
Cash
18,000
(Purchase treasury stock)
January 15
Debit
Credit
Accounts Payable
16,500
Cash
16,500
3-24 Financial Accounting, 5e
Exercise 10-17 (continued)
Requirement 1 (concluded)
January 29
Debit
Credit
Dividends
3,300
Dividends Payable
3,300
(Declare cash dividends)
($3,300=[10,000+2,000−1,000]×$0.30)
Exercise 10-17 (continued)
Requirement 2
(a) January 31
Debit
Credit
Utilities Expense
6,200
Utilities Payable
6,200
(Adjust utilities)
(b) January 31
Debit
Credit
Supplies Expense
7,300
Exercise 10-17 (continued)
Requirement 3
Grand Finale Fireworks
Adjusted Trial Balance
January 31, 2021
Accounts
Debit
Credit
Cash
$ 83,900
Accounts Receivable
42,200
Supplies
5,100
Equipment
64,000
Exercise 10-17 (continued)
Requirement 3 (continued)
Accounts
Ending
Balance
Beginning balance in bold, entries during January in blue, and
adjusting entries in red.
Cash
83,900
=
42,700+40,000−18,000−16,500+49,100+16,600+12,000−42,000
Accounts Receivable
42,200
=
44,500+14,300−16,600
Supplies
5,100
=
7,500+4,900−7,300
Income Tax Payable
2,000
=
2,000
Common Stock
12,000
=
10,000+2,000
Additional Paid-in Capital
119,200
=
80,000+38,000+1,200
Retained Earnings
45,100
=
45,100
Dividends
3,300
=
3,300
Income Tax Expense
2,000
=
2,000
3-28 Financial Accounting, 5e
Exercise 10-17 (continued)
Requirement 4
Grand Finale Fireworks
Income Statement
For the month ended January 31, 2021
Service revenue
$63,400
Salaries expense
42,000
Requirement 5
Grand Finale Fireworks
Balance Sheet
January 31, 2021
Assets
Liabilities
Cash
$ 83,900
Accounts payable
$ 3,000
Accounts receivable
42,200
Utilities payable
6,200
Supplies
5,100
Dividends payable
3,300
Total current assets
131,200
Income tax payable
2,000
Exercise 10-17 (concluded)
Requirement 6
January 31, 2021
Debit
Credit
Service Revenue
63,400
Retained Earnings
63,400
(Close revenue accounts)
Requirement 7
(a) The return on equity is:
(b) The number of common shares outstanding as of January 31, 2021 is 11,600. The company had
10,000 shares at the beginning of January, issued 2,000 additional shares on January 2, purchased
(c) Earnings per share is:
PROBLEMS: SET A
Problem 10-1A (LO 10-1)
Terms
__f___ 1. Cumulative.
__d__ 2. Retained earnings.
Definitions
a. The amount invested by stockholders.
b. Shares available to sell.
c. Shares can be returned to the corporation at a predetermined price.
Problem 10-2A (LO 10-2, 10-3, 10-4, 10-5)
Requirement 1
March 1, 2021
Debit
Credit
Cash (1,100 x $42)
46,200
Common Stock (1,100 x $0.01)
11
Additional Paid-in Capital (difference)
46,189
(Issue common stock)
October 15, 2021
Cash (200 x $45)
9,000
Preferred Stock (200 x $1)
200
Additional Paid-in Capital (difference)
8,800
(Issue preferred stock)
3-32 Financial Accounting, 5e
Requirement 2
Transaction
Total
Assets
Total
Liabilities
Total
Stockholders’
Equity
Issue common stock
+
NE
+
Purchase treasury stock
-
NE
-
Problem 10-3A (LO 10-6)
Requirement 1
Before
After 100%
Stock Dividend
After 2-for-1
Stock Split
Common stock, $1 par value
$ 1,100
$ 2,200
$ 1,100
Requirement 2
The primary reason companies declare a large stock dividend or a stock split is to
lower the trading price of the stock to a more acceptable trading range, making it
attractive to a larger number of potential investors.
Problem 10-4A (LO 10-7)
Requirement 1
6,000,000 shares = ($6,000 / $1 par value per share) in thousands (x 1,000).
Requirement 2
Requirement 3
$50 per share. The total paid-in capital for common stock is $900,000 (30,000 x
Requirement 4
(in millions)
Requirement 5
$32 per share ($352,000 / 11,000 shares).
3-34 Financial Accounting, 5e
Problem 10-5A (LO 10-7)
Requirement 1
Donnie Hilfiger
Balance Sheet
(Stockholders’ Equity Section)
December 31, 2021
Stockholders’ equity:
Preferred stock, $1 par value
$ 500
Requirement 2
Donnie Hilfiger
Statement of Stockholders’ Equity
For the Year Ended December 31, 2021
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Total
Stockholders’
Equity
Balance, January 1
$300
$40
$ 76,000
$30,500
$ -0-
$106,840
Requirement 3
Items 1 and 2 are similar in that item 1 shows the equity balances in a column
3-36 Financial Accounting, 5e
Problem 10-6A (LO 10-2, 10-3, 10-4, 10-5, 10-7)
Requirement 1
January 2, 2021
Debit
Credit
Cash (110,000 x $70)
7,700,000
Common Stock (110,000 x $1)
110,000
Additional Paid-in Capital (difference)
7,590,000
(Issue common stock above par)
May 31, 2021
Cash (5,500 shares x $65)
357,500
Treasury Stock (5,500 shares x $60)
330,000
Additional Paid-in Capital (5,500 shares x $5)
27,500
(Resell treasury stock above cost)
Requirement 2
Major League Apparel
Balance Sheet
(Stockholders’ Equity Section)
December 31, 2021
Stockholders’ equity:
Preferred stock, $10 par value
$ 600,000
Problem 10-7A (LO 10-8)
Requirement 1
($ in millions)
Net
Income
÷
Average
Stockholders’ Equity
=
Return on
Equity
Requirement 2
Dividends
Per Share
÷
Stock
Price
=
Dividend
Yield
Requirement 3
($ in millions)
Stock
Price
÷
Earnings Per Share
=
Price-Earnings
Ratio
PROBLEMS: SET B
Problem 10-1B (LO 10-1 to 10-8)
Terms
__e___ 1. PE ratio.
__i___ 2. Stockholders’ equity section of the balance sheet.
Definitions
a. A debit balance in retained earnings.
b. Priced high in relation to current earnings as investors expect future earnings
to be higher.
3-40 Financial Accounting, 5e
Problem 10-2B (LO 10-2, 10-3, 10-4, 10-5)
Requirement 1
March 1, 2021
Debit
Credit
Cash (3,000 x $10)
30,000
Common Stock (3,000 x $1.00)
3,000
Additional Paid-in Capital (difference)
27,000
(Issue common stock)
June 30, 2021
Dividends Payable (6,300 shares x $0.25)
1,575
Cash
1,575
(Pay cash dividends)
