(5-10 min) E 10-26A
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Millions
Treasury Stock ………………………………………………
28
Cash ………………………………………………………….
28
Cash ……………………………………………………………..
9
Treasury Stock …………………………………………..
(10 min.) E 10-27A
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Millions
b.
Cash (6 million × $12.50) ………………………………..
75
Common Stock (6 million × $1.00) ……………….
6
Paid-in Capital in Excess of Par Value …………
69
Treasury Stock ……………………………………………..
Cash ………………………………………………………….
Cash …………………………………………………………….
60
Treasury Stock …………………………………………..
e.
Retained Earnings …………………………………………
36
Dividends Payable ……………………………………..
36
Dividends Payable …………………………………………
36
Cash ………………………………………………………….
36
or one entry only:
Retained Earnings …………………………………………
36
Cash ………………………………………………………….
36
Req. 2
(10 min.) E 10-28A
Millions
Stockholders’ Equity:
Common stock, $1.00 par value,
32 million shares issued ($26 + $6) ………………………….
$ 32
Paid-in capital in excess of par value ($91 + $69) ………….
160
Paid-in capital from treasury stock transactions …………..
Treasury stock, at cost ($40 + $121 − $55) ……………………
$ 771
(20-30 min.) E 10-29A
Req. 1
Possible causes for preferred stock decrease:
Req. 2
Possible causes for common stock increase:
• Preferred stockholders converted their preferred into common
• Issued stock for cash or other assets
• Distributed stock dividend
Req. 3
(Millions of shares)
Dec. 31, 2017
Common shares issued ………………………………………….
200
Less: Treasury stock, number of shares………………….
(38)
Req. 4
Retained Earnings (Millions)
Dec. 31, 2016
Bal.
5,025
Dividends
105
Net income
1,380
Dec. 31, 2017
Bal.
6,300
Req. 5 (All amounts in millions)
December 31,
Purchases
2017
2016
During 2017
Treasury stock, number of shares ………
=
÷ 30
Average price per share paid for
treasury stock purchased during 2017 ………
$24.07
(15 min.) E 10-30A
Req. 1
Preferred
Common
Total
2016
Total dividend
$120,000
Preferred dividends in arrears:
2014: 65,000 shares × $4.00 (par)
per share × .07 =
$18,200
Preferred dividends, current year :
Remainder to common
2017
Total dividend
$204,000
Preferred dividends, current year:
2017: 65,000 shares × $4.00 (par)
per share × .07 =
$18,200
Remainder to common
$185,800
(15-20 min.) E 10-31A
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
June
16
Retained Earnings (400,000 × .12 × $18) ………
864,000
Common Stock (400,000 × .12 × $0.40) ……
19,200
Paid-in Capital in Excess of
Par – Common ……………………………………
844,800
To declare and distribute a common stock dividend.
Req. 2
Stockholders’ equity:
Common stock, $0.40 par, 2,300,000 shares authorized,
448,000 issued ($160,000 + $19,200) …………………..
$ 179,200
($861,013 + $844,800) ………………………………………..
Accumulated other comprehensive income (loss) …..
Req. 3
The stock dividend did not change total stockholders’ equity because
Req. 4
Rightwell’s maximum cash dividend is limited to $550,000, the balance
of its cash account.
(15-20 min.) E 10-32A
a. Decrease stockholders’ equity by $78 million.
b. No effect.
c. No effect.
(10-15 min.) E 10-33A
Req. 1
Common:
Total stockholders’ equity ……………………………………….
$90,000
Less: Preferred equity — redemption value ………………
(25,000)
Total common equity……………………………………………….
$65,000
Book value per share ($65,000 / 4,000 shares) …………..
$ 16.25
Req. 2
Common:
$90,000
Total common equity…………………………………………………
$60,200
Book value per share ($60,200 / 4,000 shares) …………….
Req. 3
Eclectic Rug’s stock is not necessarily a good buy. Investment
decisions should be based on more than one ratio.
(10-15 min.) E 10–34A
Req. 1
Net
profit
=
Net income
=
$2,379
=
2.97%
margin
Net sales
$80,000
ratio
Asset
Net sales
=
$80,000
=
$80,000
=
1.48
turnover
=
Average total
($52,074* + $55,786**)/2
$53,930
assets
margin ratio
=
=
(12.6%)
_____
Total assets = Total liabilities + Stockholders’ equity
*Beginning of year = $52,074 ($38,029 + $14,045)
**End of year = $55,786 ($32,311 + $23,475)
(continued) E 10-34A
Req. 2
These rates of return suggest relative weakness. The company is
generating a 2.97% net profit margin ratio (moderate effectiveness). The
company is generating an asset turnover of 1.48 meaning $1.48 in sales
Req. 3
Comparative data from prior years as well as industry competitors’ ROA
and ROE measures would also be helpful when making this decision.
(10 min.) E 10-35A
Cash flows from financing activities:
Payment of long-term debt ………………………………………
$(17,075)
Proceeds from issuance of common stock ……………….
8,415
Borrowings …………………………………………………………….
6,590
Dividends paid ………………………………………………………..
(205)
(20-25 min.) E 10-36A
Req. 1
(Thousands)
$1.00 Par
Common
Stock
Additional
Paid In
Capital
Retained
Earnings
Accum. Other
Comprehensive
Income
Total
Shareholders’
Equity
Balance, Dec. 31, 2015 ..
$395
$1,630
$4,500
$7
$6,532
Net earnings ………………
1,110
1,110
Other comprehensive
1
Issuance of stock ……….
Cash dividends …………..
Balance, Dec. 31, 2016 ..
$495
$1,920
$5,535
$7,958
Req. 2
Debt ratio
=
Total liabilities
=
$7,800
=
49.5%
Total assets
$7,800 + $7,958
Req. 3
The year was profitable, as indicated by net earnings.
Req. 4
(10-15 min.) E 10–37B
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Feb.
23
Cash …………………………..………………………..
25,500
Common Stock …………………………………
3,400
Paid-in Capital in Excess of Par –
Common ………………………………………….
22,100*
Mar.
12
Inventory ………………………………………………
Equipment ……………………………………………
Common Stock …………………………………
6,400
Paid-in Capital in Excess of Par –
Common …………………………………………..
58,600*
Req. 2
Stockholders’ Equity
Common stock, $2.00 par, 10,000 shares authorized,
4,900 shares issued and outstanding…………………………
$ 9,800
Paid-in capital in excess of par − common …………………………
80,700*
Retained earnings …………………………………………………………….
(10 min.) E 10-38B
Paid-in capital consists of:
Issued common stock for legal services …………………..
$ 27,000
Issued common stock for patent ………………………………
83,000
Total paid-in capital ………………………………………………….
Unused data:
Net income
Dividends declared
Alternative short-cut solution:
1.
$ 27,000
2.
83,000
3.
4.
(10-15 min.) E 10-39B
Stockholders’ Equity (Thousands)
Common stock, $0.01 par, 900 shares issued …………………
$ 9
Paid-in capital in excess of par ……………………………………..
207
Total paid-in capital ………………………………………………………
216
Retained earnings ………………………………………………………..
643
(27)
(10-15 min.) E 10-40B
Req. 1
Stockholders’ Equity (Thousands)
Common stock, $2.00 par, 800 shares authorized,
400 shares issued, 240 shares outstanding ……………….
$ 800
Paid-in capital in excess of par …………………………………….
899
Retained earnings ……………………………………………………….
Treasury stock, common, 160 shares at cost …………………
Accumulated other comprehensive income (loss) …………
Req. 2
Treasury Stock has a larger balance than the sum of Common Stock
and Paid-in Capital in Excess of Par because Patterson Software paid a
higher price to acquire treasury stock than the price Patterson received
when it issued its stock.
(5-10 min.) E 10-41B
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Millions
Treasury Stock ………………………………………………
34
Cash ………………………………………………………….
34
Cash ……………………………………………………………..
15
Treasury Stock …………………………………………..
(10 min.) E 10-42B
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
Millions
b.
Cash (10 million × $14.00) …………………………..
140
Common Stock (10 million × $3.00) ………..
30
Paid-in Capital in Excess of Par Value ……
110
c.
Treasury Stock ………………………………………….
65
Cash …………………………………………………….
65
d.
Cash …………………………………………………………
56
Treasury Stock ……………………………………..
52
Paid-in Capital from Treasury Stock
Transactions …………………………………….
4
Retained Earnings ……………………………………..
33
Dividends Payable…………………………………
33
Dividends Payable ……………………………………..
33
Cash …………………………………………………….
33
or one entry only:
Retained Earnings ……………………………………..
33
Cash …………………………………………………….
33
*$65 / 5 = $13 cost per share of treasury stock
$13 x 4 = $52
Req. 2
(10 min.) E 10-43B
Millions
Stockholders’ Equity:
Common stock, $3.00 par value, 32 million shares
issued ($66 + $30) …………………………………………………
$ 96
Paid in capital in excess of par value ($33 + $110) ………
Paid-in capital from treasury stock transactions …………
(20-30 min.) E 10-44B
Req. 1
Possible causes for preferred stock decrease:
Req. 2
Possible causes for common stock increase:
Common stock issued—
• To preferred stockholders who converted their preferred
into common
Req. 3
(Millions
of shares
of stock)
Dec. 31, 2017
Common shares issued……………………………..
300
(57)
243
(continued) E 10-44B
Req. 4
Retained Earnings (Millions)
Dec. 31, 2016
Bal.
5,075
Dividends
205
Net income
1,430
Dec. 31, 2017
Bal.
6,300
Req. 5 (All amounts in millions)
December 31,
Purchases
2017
2016
During 2017
Cost of treasury stock ……………………….
$1,254
=
$1,026
Treasury stock, number of shares ………
12
=
treasury stock purchased during 2017 ……….
(15 min.) E 10-45B
Req. 1
Preferred
Common
Total
2016
Total dividend
$90,000
Preferred dividends in arrears:
2014: 55,000 shares × $2.50 (par)
per share × .04 =
$ 5,500
2015: 55,000 shares × $2.50 (par)
per share × .04 =
5,500
Preferred dividends, current year :
2016: 55,000 shares × $2.50 (par)
Total to preferred
Remainder to common
2017
Total dividend
$225,000
Preferred dividends, current year:
2017: 55,000 shares × $2.50 (par)
Remainder to common