FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-73A
(10-15 min.)
Requirement
Solution:
Stockholders’ equity:
Preferred stock, 7%, $110 par, 5,000 shares authorized,
2,500 shares issued and outstanding 275,000$
Prepare the stockholders’ equity section of Rollo Corp.’s balance sheet at
December 31, 2016. Show the computation of all amounts. Journal entries are
not required.
Rollo Corp.
Balance Sheet (partial)
December 31, 2016
Chapter 10: Stockholders’ Equity Page 61 of 98
Common stock, no-par, 650,000 shares authorized,
65,000 shares issued and outstanding 511,000
Total paid-in capital 786,000
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-74A
(25-35 min.)
Requirements
Solution:
Req. 1
Req. 2
DATE DEBIT CREDIT
Cash 2,520,000
Class A Preferred Stock 2,520,000
1. Identify the different issues of stock that Yoder Outdoor Furniture Company has
outstanding.
2. Give the summary entries to record issuance of all the Yoder stock. Assume that
all the stock was issued for cash. Explanations are not required.
3. Suppose Yoder passed its preferred dividends for three years. Would the
company have to pay those dividends in arrears before paying dividends to the
common stockholders? Give your reason.
4. What amount of preferred dividends must Yoder declare and pay each year to
avoid having preferred dividends in arrears?
5. Assume that preferred dividends are in arrears for 2016. Journalize the
declaration of an $820,000 dividend on February 28, 2017. An explanation is not
required
Yoder Outdoor Furniture Company has Class A cumulative preferred stock, Class
B cumulative preferred stock, and common stock outstanding.
Journal
ACCOUNT TITLES AND EXPLANATION
Chapter 10: Stockholders’ Equity Page 62 of 98
Cash 3,115,000
Class B Preferred Stock 3,115,000
Cash ($2,450,000 + $4,570,000) 7,430,000
Common Stock 1,860,000
Req. 3
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 4
Req. 5
DATE DEBIT CREDIT
2017
Feb. 28 Retained Earnings 820,000
Dividends Payable, Class A
Journal
ACCOUNT TITLES AND EXPLANATION
Yoder must pay preferred dividends of $338,100* each year to avoid having
preferred dividends in arrears.
Chapter 10: Stockholders’ Equity Page 63 of 98
Dividends Payable, Class B
Dividends Payable, Common 143,800**
Class A Preferred: 72,000 shares × $35 (par) × 0.06 = 151,200$
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-75A
(15-20 min.)
Requirements
Solution:
Req.1
ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT
Feb. 13 Cash (5,700 × $10) 57,000
Common Stock (5,700 × $7) 39,900
Paid-in Capital in Excess of Par − Common 17,100
1. Journalize Walker Jewelry’s transactions. Explanations are not required.
2. Report Walker Jewelry’s stockholders’ equity at December 31, 2017. Net income for
2017 was $27,000.
Journal
DATE
Chapter 10: Stockholders’ Equity Page 64 of 98
Cash 80
Paid-in Capital in Excess of Par − Common 8,400
Cash 14,400
Treasury Stock (300 × $16) 4,800
Paid-in Capital from Treasury
Dividends Payable 3,150
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 2
Stockholders’ equity:
$.40 cumulative preferred stock, $15 par, 200 shares
issued and outstanding 3,000$
Common stock, $7 par, 13,200 shares issued ($44,100 +
Chapter 10: Stockholders’ Equity Page 65 of 98
$39,900 + $8,400) and 12,600 shares outstanding 92,400
Paid-in capital in excess of par − common
($17,600 + $17,100 + $8,400) 43,100
Paid-in capital from treasury stock transactions 1,500
Total paid-in capital 140,000
Retained earnings ($25,000 + $27,000 − $80 − $16,800 – $3,150) 31,970
Less: Treasury stock, 600 shares at cost
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-76A
(20-30 min.)
Requirements
Solution:
Req. 1 and 2
Feb. 3 510,000$ = 0$ + 510,000$ 510,000$
1. Analyze each transaction in terms of its effect on the accounting equation of Dairy
Freeze, Inc.
2. What impact did each transaction have on cash flows?
STOCKHOLDERS’
EQUITY
CASH
FLOW
Assets
LIABILITIES
=
+
Chapter 10: Stockholders’ Equity Page 66 of 98
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-77A
(40-50 min.)
Requirements
Solution:
Req. 1
Current: Current:
Cash 42,000$ Accounts payable 145,000$
Accounts rec., net 20,000
Accrued liabilities
25,000
1. Prepare Seagull’s classified balance sheet in the account format at December 31,
2016.
2. Use DuPont Analysis to compute rate of return on total assets and rate of return on
common
stockholders’ equity for the year ended December 31, 2016.
3. Do these rates of return suggest strength or weakness? Give your reason. What
additional information might help you make your decision?
Seagull Designers, Inc.
Balance Sheet
December 31, 2016
ASSETS
LIABILITIES
Chapter 10: Stockholders’ Equity Page 67 of 98
Total liabilities 279,000
Property, plant, and
Intangible assets: Common stock,
Goodwill 16,000 $1 par, 1,250,000 shares
Trademarks, net 11,000 authorized, 118,000
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 2
Net income 90,000$
Net sales $ 950,000
Req. 3
These rates of return suggest strength. The company is generating a 9.47% (9.5%) net
profit margin ratio indicating great effectiveness in achieving profit goals and most likely
=
=
=
Net profit
margin ratio
9.47%
Chapter 10: Stockholders’ Equity Page 68 of 98
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-78A
(15-20 min.)
Requirements
Solution:
Req. 1
Answer these questions about Paulus Specialties’ stockholders’ equity transactions.
1. What is the par value of the company’s common stock?
2. At what price per share did Paulus Specialties issue its common stock during the
year?
3. What was the cost of treasury stock sold during the year? What was the selling
price of the treasury stock sold? What was the increase in total stockholders’ equity?
4. Paulus Specialties’ statement of stockholders’ equity lists the stock transactions in
the order in which they occurred. What was the percentage of the stock dividend?
Round to the nearest percentage. (Ignore treasury stock in answering this question.)
Par value of common
stock:
=
$100 million par value
100 million shares issued
$1.00 per share
Chapter 10: Stockholders’ Equity Page 69 of 98
Req. 2
Req. 3
Req. 4
=
=
$4.00 per share
100 million shares issued
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-79B
(30-45 min.)
Requirements
Solution:
Req. 1
DEBIT CREDIT
Jan 6 Organization Expense 1,800
Common Stock (100 × $15) 1,500
1. Record the transactions in the journal.
2. Prepare the stockholders’ equity section of Canal Kayaks, Inc., balance sheet at January
31, 2017. The ending balance of Retained Earnings is $65,000.
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
Chapter 10: Stockholders’ Equity Page 70 of 98
Issued stock to promoter for assisting with
Common Stock (26,000 × $15) 390,000
Issued common stock for cash.
Common Stock (1,400 × $15) 21,000
Issued common stock for cash.
Req. 2
Common stock, $15 par, 125,000 shares authorized,
27,500* shares issued and outstanding 412,500$
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-80B
(10-15 min.)
Requirement
Solution:
Stockholders’ equity:
Preferred stock, 6%, $110 par, 9,000 shares authorized,
2,250 shares issued and outstanding 247,500$
1. Prepare the stockholders’ equity section of Jackson Corp.’s balance sheet at
December 31, 2016. Show the computation of all amounts. Journal entries are not
required.
Jackson Corp.
Balance Sheet (partial)
December 31, 2016
Chapter 10: Stockholders’ Equity Page 71 of 98
Common stock, no-par, 450,000 shares authorized,
112,500 shares issued and outstanding 515,000
Total paid-in capital 762,500
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-81B
(25-35 min.)
Requirements
Solution:
Req. 1
1. Identify the different issues of stock that Classic Outdoor Furniture Company has
outstanding.
2. Give the summary entries to record issuance of all the Classic stock. Assume that all
the stock was issued for cash. Explanations are not required.
3. Suppose Classic passed its preferred dividends for three years. Would the company
have to pay those dividends in arrears before paying dividends to the common
stockholders? Give your reasons.
4. What amount of preferred dividends must Classic declare and pay each year to avoid
having preferred dividends in arrears?
5. Assume that preferred dividends are in arrears for 2016. Journalize the declaration of
an $870,000 dividend on February 28, 2017. An explanation is not required.
Classic Outdoor Furniture Company has Class A cumulative preferred stock, Class B
cumulative preferred stock, and common stock outstanding.
Chapter 10: Stockholders’ Equity Page 72 of 98
Req. 2
Req. 3
Classic Outdoor Furniture would have to pay all preferred dividends in arrears before
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 4
Req. 5
DATE DEBIT CREDIT
2017
Feb. 28 Retained Earnings 870,000
Dividends Payable, Class A
Journal
ACCOUNT TITLES AND EXPLANATION
Classic must pay preferred dividends of $352,800* each year to avoid having preferred
dividends in arrears.
Chapter 10: Stockholders’ Equity Page 73 of 98
Dividends Payable, Class B
Dividends Payable, Common 164,400**
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-82B
(15-20 min.)
Requirements
Solution:
Req.1
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
1. Journalize Dublin Jewelry’s transactions. Explanations are not required.
2. Report Dublin Jewelry’s stockholders’ equity at December 31, 2017. Net income for
2017 was $23,000.
Journal
DATE
Chapter 10: Stockholders’ Equity Page 74 of 98
Dividends Payable (200 shares × $0.90) 180
Cash 180
Paid-in Capital in Excess of Par − Common 6,600
Cash 14,000
Treasury Stock (800 × $14) 11,200
Paid-in Capital from Treasury Stock Transactions 4,000
Dividends Payable 3,113
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 2
Stockholders’ equity:
$0.90 cumulative preferred stock, $20 par, 200 shares
issued and outstanding 4,000$
Chapter 10: Stockholders’ Equity Page 75 of 98
Common stock, $5 par, 12,650 shares issued ($30,500 +
$24,500 + $8,250) and 12,450 shares outstanding 63,250
Paid-in capital in excess of par – common
($17,300 + $14,700 + $6,600) 38,600
Paid-in capital from treasury stock transactions 4,000
Total paid-in capital 109,850
Retained earnings ($29,000 + $23,000 − $180 − $14,850 − $3,113).. 33,857
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-83B
(20-30 min.)
Requirements
Solution:
Req. 1 and 2
Feb. 3 416,000$ = 0$ + 416,000$ 416,000$
1. Analyze each transaction in terms of its effect on the accounting equation of Sweet
Treats, Inc.
2. What impact did each transaction have on cash flows?
Assets
LIABILITIES
STOCKHOLDERS’
EQUITY
CASH
FLOW
=
+
Chapter 10: Stockholders’ Equity Page 76 of 98
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-84B
(40-50 min.)
Requirements
Solution:
Req. 1
Current: Current:
Cash 50,000$
Accounts payable
130,000$
Accounts rec., net 23,000 Accrued liabilities 26,000
Ginger Designers, Inc.
Balance Sheet
Decenber 31, 2016
1. Prepare Ginger’s classified balance sheet in the account format at December 31, 2016.
2. Use DuPont Analysis to compute rate of return on total assets and rate of return on
common stockholders’ equity for the year ended December 31, 2016.
3. Do these rates of return suggest strength or weakness? Give your reason. What
additional information might help you make your decision?
ASSETS
LIABILITIES
Chapter 10: Stockholders’ Equity Page 77 of 98
Total current assets 178,000
Intangible assets: EQUITY
Trademarks, net 6,000 Common stock,
Goodwill 16,000 $2 par, 1,500,000 shares
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 2
Net profit Net income $ 32,000 4.92%
margin Net sales $ 650,000
ratio
=
=
=
Chapter 10: Stockholders’ Equity Page 78 of 98
Asset Net sales $ 650,000 $ 650,000 1.232
turnover $ 527,500
Leverage $ 527,500 1.904
Req. 3
=
=
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P10-85B
(15-20 min.)
Requirements
Solution:
Req. 1
$100 million par value
200 million shares issued
$0.50 per share
Answer these questions about Fall River Specialties’ stockholders’ equity transactions.
1. What is the par value of the company’s common stock?
2. At what price per share did Fall River Specialties issue its common stock during the
year?
3. What was the cost of treasury stock sold during the year? What was the selling
price of the treasury stock sold? What was the increase in total stockholders’ equity?
4. Fall River Specialties’ statement of stockholders’ equity lists the stock transactions
in the order in which they occurred. What was the percentage of the stock dividend?
Round to the nearest percentage. (Ignore treasury stock in answering this question.)
Par value of common
stock:
=
Chapter 10: Stockholders’ Equity Page 79 of 98
Req. 2
Req. 3
Req. 4
$1.10 per share
=
=
200 million shares issued