Exercise 10-15 (LO 10-8)
Requirement 1
÷
=
Friendly Fashions
$312
÷
=
Requirement 2
÷
=
Friendly Fashions
÷
=
Requirement 3
($ in millions)
Net
Income
÷
Shares Outstanding
=
Earnings per Share
Friendly Fashions
$312
÷
675
=
$0.46
Requirement 4
($ in millions)
÷
=
Friendly Fashions
÷
=
Exercise 10-16 (LO 10-8)
Requirement 1
($ in millions)
Net Income
Minus
Preferred
Dividends
÷
Average Shares
Outstanding
=
Earnings per Share
2020
÷
=
2021
=
Requirement 2
($ in millions)
Stock Price
÷
Earnings Per Share
=
Price-Earnings
Ratio
2020
$10.97
÷
$0.7325
=
$14.98
2021
÷
$0.7267
=
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 9
Debit
Credit
Accounts Receivable
14,300
Service Revenue
14,300
January 10
Debit
Credit
Supplies
Accounts Payable
4,900
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
January 21
Debit
Credit
Cash
49,100
Service Revenue
49,100
January 22
Debit
Credit
Cash
16,600
Accounts Receivable
16,600
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)
January 30
Debit
Credit
Cash
Treasury Stock
Additional Paid-in Capital
1,200
January 31
Debit
Credit
Salaries Expense
Cash
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
Supplies
7,300
($7,300 = $7,500+$4,900−$5,100)
(c) January 31
Debit
Credit
Depreciation Expense
1,500
Accumulated Depreciation
1,500
(d) January 31
Debit
Credit
Income Tax Expense
2,000
Income Tax Payable
2,000
(Adjust income taxes)
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
Accumulated Depreciation
$ 10,500
Accounts Payable
3,000
Utilities Payable
6,200
Dividends Payable
3,300
Income Tax Payable
2,000
Common Stock
12,000
Additional Paid-in Capital
Retained Earnings
45,100
Dividends
3,300
Treasury Stock
7,200
Service Revenue
63,400
Salaries Expense
42,000
Utilities Expense
6,200
Supplies Expense
7,300
Depreciation Expense
1,500
Income Tax Expense
2,000
Totals
$264,700
$264,700
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
Equipment
64,000
=
64,000
Accumulated Depreciation
10,500
=
9,000+1,500
Accounts Payable
3,000
=
14,600+4,900−16,500
Utilities Payable
6,200
=
Dividends Payable
3,300
=
3,300
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
Treasury Stock
7,200
=
Service Revenue
63,400
=
Salaries Expense
42,000
=
42,000
Utilities Expense
8,200
=
8,200
Supplies Expense
7,300
=
Depreciation Expense
1,500
=
1,500
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
Utilities expense
Supplies expense
Depreciation expense
Income before taxes
Income tax expense
Net income
Requirement 5
Grand Finale Fireworks
Balance Sheet
January 31, 2021
Assets
Liabilities
Cash
$ 83,900
Accounts payable
$ 3,000
42,200
Utilities payable
6,200
5,100
Dividends payable
3,300
Total current assets
131,200
Income tax payable
2,000
Total current liabilities
Common stock
Additional paid-in capital
Retained earnings
*
Equipment
64,000
Treasury stock
Less: Accumulated Depreciation
Total assets
$184,700
Exercise 10-17 (concluded)
Requirement 6
January 31, 2021
Debit
Credit
Service Revenue
63,400
Retained Earnings
63,400
(Close revenue accounts)
Retained Earnings
59,000
42,000
(Close expense accounts)
Retained Earnings
3,300
(Close dividend account)
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:
Net Income
$4,400
Average Shares Outstanding
PROBLEMS: SET A
Problem 10-1A (LO 10-1)
Terms
__f___ 1. Cumulative.
__d__ 2. Retained earnings.
__g__ 3. Outstanding stock.
__h__ 4. Limited liability.
__e__ 6. Issued stock.
__i__ 7. Angel investors.
__a__ 8. Paid-in capital.
__b__ 9. Authorized stock.
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)
May 15, 2021
Treasury Stock (400 shares x $35)
14,000
(Purchase treasury stock)
July 10, 2021
Cash (200 shares x $40)
Treasury Stock (200 shares x $35)
7,000
Additional Paid-in Capital (200 x $5)
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)
December 1, 2021
Dividends (5,400 shares x $0.50)
(Declare cash dividends)
December 31. 2021
Dividends Payable (5,400 shares x $0.50)
(Pay cash dividends)
3-32 Financial Accounting, 5e
Requirement 2
Transaction
Total
Assets
Total
Liabilities
Total
Stockholders’
Equity
Issue common stock
+
NE
+
Purchase treasury stock
–
NE
–
Resell treasury stock
+
NE
+
Issue preferred stock
+
NE
+
Declare cash dividends
Pay cash dividends
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
Retained earnings
Shares outstanding
Share price
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)
+ Net income
= Retained earnings, ending
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
Common stock, $0.01 par value
Additional paid-in capital
Retained earnings
Treasury stock, 200 shares
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
Issue common stock
Purchase treasury stock
Resell treasury stock
1,000
Issue preferred stock
8,800
Declare cash dividends
Net income
Balance, December 31
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)
February 14, 2021
Cash (60,000 x $12)
720,000
Preferred Stock (60,000 x $10)
600,000
Additional Paid-in Capital (difference)
120,000
(Issue preferred stock above par)
May 8, 2021
Treasury Stock (11,000 shares x $60)
660,000
660,000
(Purchase treasury stock)
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)
December 1, 2021
Dividends [(104,500 shares x $0.25) + $36,000]
62,125
62,125
(Declare cash dividends)
December 30, 2021
62,125
(Pay cash dividends)
Requirement 2
Major League Apparel
Balance Sheet
(Stockholders’ Equity Section)
December 31, 2021
Stockholders’ equity:
Preferred stock, $10 par value
$ 600,000
Common stock, $1 par value
Retained earnings
Treasury stock, 5,500 shares
$8,545,375
Problem 10-7A (LO 10-8)
Requirement 1
($ in millions)
Net
Income
÷
Average
Stockholders’ Equity
=
Return on
Equity
÷
=
Requirement 2
Dividends
Per Share
÷
=
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.
__c___ 5. 100% stock dividend.
__j___ 7. Treasury stock.
__g___ 8. Value stocks.
__d___ 10. Retained earnings,
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)
April 1, 2021
Cash (175 shares x $40)
7,000
Preferred Stock (175 shares x $10)
1,750
Additional Paid-in Capital (difference)
5,250
June 1, 2021
Dividends (6,300 shares x $0.25)
1,575
Dividends Payable
1,575
June 30, 2021
Dividends Payable (6,300 shares x $0.25)
1,575
Cash
1,575
(Pay cash dividends)
August 1, 2021
Treasury Stock (175 shares x $7)
1,225
1,225
October 1, 2021
Cash (125 shares x $9)
1,125
875
250