Exercise 10-15 (LO 10-8)
Requirement 1
($ in millions)
Net
Income
÷
Average
Stockholders’ Equity
=
Return on
Equity
÷
=
Requirement 2
($ in millions)
Dividends
Per Share
÷
=
Dividend
Yield
÷
=
Requirement 3
($ in millions)
Net
Income
÷
Shares Outstanding
=
Earnings per Share
÷
=
Requirement 4
($ in millions)
Stock
Price
÷
Earnings Per Share
=
Price-Earnings
Ratio
÷
=
Exercise 10-16 (LO 10-8)
Requirement 1
($ in millions)
Net Income
Minus
Preferred
Dividends
÷
Average Shares
Outstanding
=
Earnings per Share
2017
÷
=
2018
÷
=
Requirement 2
($ in millions)
Stock Price
÷
Earnings Per Share
=
Price-Earnings
Ratio
2017
$10.97
÷
$0.73
=
15.0
2018
÷
$0.73
=
16.5
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
4,900
Accounts Payable
4,900
January 12
Debit
Credit
Treasury Stock
18,000
Cash
18,000
(Repurchase 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
Exercise 10-17 (continued)
Requirement 1 (concluded)
January 29
Debit
Credit
Dividends
3,300
Dividends Payable
3,300
January 30
Debit
Credit
Cash
Treasury Stock
Additional Paid-in Capital
1,200
January 31
Debit
Credit
Salaries Expense
Cash
(Declare cash dividends)
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, 2018
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
119,200
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
$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
=
7,500+4,900−7,300
Equipment
64,000
=
64,000
Accumulated Depreciation
10,500
=
9,000+1,500
Accounts Payable
=
14,600+4,900−16,500
Utilities Payable
=
Dividends Payable
=
Income Tax Payable
=
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
=
Treasury Stock
=
Service Revenue
63,400
=
Salaries Expense
42,000
=
Utilities Expense
=
Supplies Expense
=
Depreciation Expense
=
Income Tax Expense
=
Exercise 10-17 (continued)
Requirement 4
Grand Finale Fireworks
Income Statement
For the month ended January 31, 2018
Service revenue
$63,400
Salaries expense
42,000
Utilities expense
6,200
Supplies expense
7,300
Depreciation expense
1,500
6,400
Income tax expense
2,000
Requirement 5
Grand Finale Fireworks
Balance Sheet
January 31, 2018
Assets
Liabilities
Cash
$ 83,900
Accounts payable
$ 3,000
42,200
Utilities payable
6,200
Dividends payable
3,300
Income tax payable
2,000
Common stock
Additional paid-in capital
Retained earnings
*
Equipment
64,000
Treasury stock
(7,200)
Less: Accumulated Depreciation
$184,700
Exercise 10-17 (concluded)
Requirement 6
January 31, 2018
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:
Return on
Equity Ratio
=
Net Income
=
$4,400
=
2.9%
Average Stockholders’
Equity
($135,100 + $170,200) / 2
(c) Earnings per share is:
Earnings Per
Share
=
Net Income
=
$4,400
=
0.41
Average Shares Outstanding
(10,000 + 11,600) / 2
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.
Problem 10-2A (LO 10-2, 10-3, 10-4, 10-5)
Requirement 1
March 1, 2018
Debit
Credit
Cash (1,100 x $42)
46,200
Common Stock (1,100 x $0.01)
11
Additional Paid-in Capital (difference)
May 15, 2018
Treasury Stock (400 shares x $35)
July 10, 2018
Cash (200 shares x $40)
8,000
Treasury Stock (200 shares x $35)
Additional Paid-in Capital (200 x $5)
October 15, 2018
Cash (200 x $45)
Preferred Stock (200 x $1)
December 1, 2018
Dividends (5,400 shares x $0.50)
December 31. 2018
Dividends Payable (5,400 shares x $0.50)
Requirement 2
Transaction
Total
Assets
Total
Liabilities
Total
Stockholders’
Equity
Issue common stock
+
NE
+
+
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
Additional paid-in capital
59,000
59,000
59,000
Retained earnings
Shares outstanding
Share price
Requirement 2
The primary reason companies declare a large stock dividend or a stock split is to
Problem 10-4A (LO 10-7)
Requirement 1
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)
Retained earnings, beginning
$250
+ Net income
= Retained earnings, ending
Requirement 5
Problem 10-5A (LO 10-7)
Requirement 1
Donnie Hilfiger
Balance Sheet
(Stockholders’ Equity Section)
December 31, 2018
Stockholders’ equity:
Preferred stock, $1 par value
$ 500
Common stock, $0.01 par value
51
Additional paid-in capital
Retained earnings
Treasury stock, 200 shares
Requirement 2
Donnie Hilfiger
Statement of Stockholders’ Equity
For the Year Ended December 31, 2018
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 of common stock
Purchase of treasury stock
Sale of treasury stock
1,000
Issued preferred stock
8,800
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
format and item 2 shows these same balances across the bottom row. However,
Problem 10-6A (LO 10-2, 10-3, 10-4, 10-5, 10-7)
Requirement 1
January 2, 2018
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
February 14, 2018
Cash (60,000 x $12)
720,000
Preferred Stock (60,000 x $10)
600,000
Additional Paid-in Capital (difference)
120,000
May 8, 2018
Treasury Stock (11,000 shares x $60)
660,000
660,000
May 31, 2018
Cash (5,500 shares x $65)
357,500
Treasury Stock (5,500 shares x $60)
330,000
27,500
December 1, 2018
Dividends [(104,500 shares x $0.25) + $36,000]
62,125
62,125
December 30, 2018
Dividends Payable
62,125
Requirement 2
Major League Apparel
Balance Sheet
(Stockholders’ Equity Section)
December 31, 2018
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
÷
=