(10-15 min.) P 10-80B
Req. 1
Jackson Corp.
Balance Sheet (partial)
December 31, 2016
Stockholders’ equity:
Preferred stock, 6%, $110 par, 9,000 shares authorized,
2,250 shares issued and outstanding ……………………….
$247,500
Common stock, no-par, 450,000 shares authorized,
112,500 shares issued and outstanding ……………………
515,000
Total paid-in capital …………………………………………………….
Retained earnings ……………………………………………………….
94,300
_____
Computations:
(25-35 min.) P 10–81B
Req. 1
Classic Outdoor Furniture Company has Class A cumulative preferred
stock, Class B cumulative preferred stock, and common stock
outstanding.
Req. 2
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Cash …………………………………………..
2,765,000
Class A Preferred Stock …………..
2,765,000
Cash …………………………………………..
Class B Preferred Stock …………..
3,115,000
Cash ($1,200,000 + $5,540,000) …….
Common Stock ………………………..
Common ………………………………
Req. 3
Classic Outdoor Furniture would have to pay all preferred dividends in
arrears before paying dividends to common stockholders because the
preferred stock is cumulative.
(continued) P 10-81B
Req. 4
Classic must pay preferred dividends of $352,800* each year to avoid
having preferred dividends in arrears.
Req. 5
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
2017
Feb.
Retained Earnings …………………………………..
Dividends Payable, Class A
Preferred ($165,900 × 2). ………………….
331,800
Preferred ($186,900 × 2) …………………..
373,800
Dividends Payable, Common ……………….
_____
Computations:
*Class A Preferred: 79,000 shares × $35 (par) per share × 0.06 = $ 165,900
Class B Preferred: 89,000 shares × $35 (par) per share × 0.06 = 186,900
(15-20 min.) P 10-82B
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Feb.
13
Cash (4,900 × $8) ……………………………………..
39,200
Common Stock (4,900 × $5) ………………….
24,500
Paid-in Capital in Excess of Par −
Common ………………………………………….
14,700
June
7
Retained Earnings ……………………………………
Dividends Payable (200 shares × $0.90) ….
24
Dividends Payable ……………………………………
Cash …………………………..………………………
Aug.
9
Retained Earnings
(11,000 shares × .15 × $9) ………………………….
14,850
Common Stock (11,000 × .15 × $5) ………..
8,250
Paid-in Capital in Excess of Par −
Common ………………………………………….
6,600
Oct.
26
Treasury Stock, Common (1,000 × $14) ……..
14,000
Cash …………………………..………………………
14,000
Nov.
20
Cash (800 × $19) ………………………………………
15,200
Treasury Stock, Common (800 × $14) ……
Paid-in Capital from Treasury
Stock Transactions …………………………..
4,000
Dec.
31
Dividends Payable ……………………………….
(continued) P 10-82B
Req. 2
Stockholders’ equity:
$0.90 cumulative preferred stock, $20 par, 200 shares
issued and outstanding …………………………………………………..
$ 4,000
Common stock, $5 par, 12,650 shares issued ($30,500 +
$24,500 + $8,250) and 12,450 shares outstanding ……………..
($17,300 + $14,700 + $6,600) …………………………………………….
Retained earnings ($29,000 + $23,000 − $180 − $14,850 − $3,113)..
Less: Treasury stock, common, 200 shares at cost
(20-30 min.) P 10-83B
Req. 1 and 2
ASSETS
=
LIABILITIES
+
STOCKHOLDERS’
EQUITY
CASH
FLOW
Feb.
3
$416,000
=
$ 0
+
$416,000
$+416,000
Mar.
19
(59,400)
=
0
+
(59,400)
-59,400
Apr.
24
=
+
Aug.
15
=
+
Sept.
1
( 9,600)
=
+
Nov.
22
=
+
(40-50 min.) P 10-84B
Req. 1
Ginger Designers, Inc.
Balance Sheet
December 31, 2016
ASSETS
LIABILITIES
Current:
Current:
Cash ………………………..
$ 50,000
Accounts payable ………………..
$130,000
Accounts receivable,
Accrued liabilities ………………..
26,000
net ………………………..
Inventory …………………
Total current liabilities …………….
Prepaid
expenses ………………
Total current assets …….
Total liabilities ………………………..
Property, plant,
STOCKHOLDERS’
and equipment,
EQUITY
net …………………………..
363,000
Common stock,
Intangible assets:
$2 par, 1,500,000 shares
Trademarks, net ……….
6,000
authorized, 112,000
Goodwill…………………..
16,000
shares issued and 103,000
shares outstanding ……………..
224,000
par— common …………………….
Retained earnings …………………..
Less: Treasury stock,
at cost …………………………………
Total liabilities and
Total assets …………………
$563,000
stockholders’ equity ……………
$563,000
(continued) P 10-84B
Req. 2
Net
profit
=
Net income
=
$32,000
=
4.92%
margin
Net sales
$650,000
=
Net sales
=
$650,000
=
=
ratio
Leverage
=
Average total
assets
=
$527,500
=
1.904
ratio
Avg. stockholders’
equity
($247,000+$307,000) /2
x
=
=
(continued) P 10-84B
Req. 3
These rates of return suggest weakness. The company is generating a
6.1% net profit margin ratio indicating some effectiveness in achieving
profit goals and perhaps some product differentiation. The company is
generating an asset turnover of 1.23, meaning $1.23 in sales for each
(15-20 min.) P 10-85B
Req. 1
Req. 2
$220 million
Req. 3
Cost of treasury stock sold: $7 million
Req. 4
Challenge Exercises and Problem
(20-25 min.) E 10-86
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
(a)
Cash (52,000* × $6) …………………………………
312,000
Common Stock …………………………..……..
52,000
Additional Paid-in Capital …………………..
260,000
Issued stock.
(b)
Treasury Stock (1,300 × $11) ………………….
14,300
Cash ………………………………………………..
14,300
Purchased treasury stock.
(c)
Cash …………………………………………………….
1,400
Treasury Stock ($14,300 − $13,200) ……
1,100
Additional Paid-in Capital …………………..
300
(d)
Revenues ……………………………………………..
171,000
Expenses …………………………………………
Retained Earnings …………………………….
52,000
Closed net income to Retained Earnings.
Resold treasury stock.
(d)
Retained Earnings ($52,000 − $27,000) ……
25,000
Cash ………………………………………………..
25,000
Declared and paid dividends.
(20-25 min.) E 10-87
Statement of cash flows:
Cash Flows from Financing Activities:
Issuance of common stock ……………………………………
$312,000
Purchase of treasury stock ……………………………………
Sale of treasury stock ……………………………………………
Payment of dividends ……………………………………………
(15 min.) E 10-88
Preferred stock:
Atlantic retired preferred stock of $124 million ($730 − $606)
Common stock and Additional paid-in capital:
Atlantic issued 22 million shares of common
stock for $66 million, computed as follows:
Millions
Common stock ($906 − $884) …………………………………..
Total received for issuance of common stock …………..
Retained earnings:
Millions
Beginning balance ………………………………………………………
$19,108
Add: Net income………………………………………………………….
2,940
Less: Dividends declared …………………………………………….
Ending balance …………………………………………………………..
$20,650
Treasury stock:
Atlantic purchased treasury stock for $195 million ($2,800 − $2,605).
(15 min.) E 10-89
Req. 1
Additional
Amounts in Millions
Common
Stock
+
Paid-in
Capital
+
Retained
Earnings
−
Treasury
Stock
=
Total
Equity
Balance, Dec. 31, 2016 ….
$ 9.01
$9.0
$36.0
$54.0
Issuance of stock …………
Stock dividend ……………..
Purchase of treasury
stock ………………………
Net income …………………..
Cash dividends …………….
(13.0)
Balance, Dec. 31, 2017 ….
$39.0
Computations:
1$9,000,000 ÷ $1 par = 9,000,000 shares
24,000,000 × $1 par = $4,000,000
(20-25 min.) P 10-90
Req. 1
$350,000 / 1,000,000 shares = $.35 per share
Req.2
Req. 3
Common stock $ 350,000
Req. 4
Journal
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Cash ………………………………………………………. 4,770,000
Common Stock ($350,000 – $315,000) … 35,000
Req. 5
Proceeds from issuance of stock $4,770,000
(continued) P 10-90
Req. 6
Cost of treasury stock $1,528,000
Req. 7
Journal
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Cash ($191,000 + $3,000)……………………….. 194,000
Treasury Stock ($1,719,000 – $1,528,000)…… 191,000
Req. 8
Journal
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Retained Earnings………………………….. 1,500,000