Wild & Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 11
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Chapter 11
Corporate Reporting and Analysis
QUICK STUDIES
Quick Study 11-1 (10 minutes)
True statements: 3, 4, 5 and 7
Quick Study 11-2 (5 minutes)
a.
Cash …………………………………………………………….
375,000
Common Stock, $5 Par Value ……………………
375,000
Issued par value stock for cash. (75,000 x $5)
Cash* ……………………………………………………………
450,000
Common Stock, $5 Par Value ……………………
375,000
Quick Study 11-3 (5 minutes)
a.
Cash* ……………………………………………………………
648,000
Common Stock, $2 Par Value** …………………
72,000
Paid-In Capital in Excess of Par Value,
Common Stock*** …………………………………..
576,000
Cash* ……………………………………………………………
648,000
Common Stock, $2 Stated Value** …………….
72,000
Paid-In Capital in Excess of Stated Value,
Wild & Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 11
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Quick Study 11-4 (5 minutes)
a.
Cash …………………………………………………………………
1,827,000
Common Stock, No-Par Value ……………………….
1,827,000
1,827,000
Common Stock, No-Par Value ……………………….
1,827,000
Quick Study 11-5 (15 minutes)
a. Mar. 1
Cash ………………………………………………………..
297,500
Common Stock, $4 Par Value ……………….
170,000
70,000
Common Stock, No-Par Value ………………
70,000
Paid-In Capital in Excess of Par Value,
c. Apr. 6
Inventory ………………………………………………….
45,000
Machinery ………………………………………………..
145,000
Note Payable ………………………………………..
94,000
Common Stock, $25 Par Value ……………..
50,000
Common Stock ………………………………….
46,000
729
Quick Study 11-6 (10 minutes)
Retained Earnings …………………………………….
165,000
Common Dividend Payable ………………….
165,000
Declared cash dividend on common.
assemble a payee list for the dividend as of Aug 15.
Common Dividend Payable ……………………….
165,000
Cash …………………………………………………..
165,000
Quick Study 11-7 (15 minutes)
a.
July 1
Retained Earnings ………………………………………..
4,000
Common Stock Dividend Distributable* …..
1,000
b.
July 20
Common Stock Dividend Distributable …………
1,000
Common Stock, $2 Par Value ………………….
1,000
Issued common stock for cash.
Wild & Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 11
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Quick Study 11-8 (10 minutes)
Jun Co.
Stockholders’ Equity
April 2 (after stock dividend)
Common stock⎯$5 par value, 375,000 shares
authorized, 220,000 shares issued and outstanding …………..
$1,100,000
Supporting work
Apr. 2
Retained Earnings ……………………………………………..
400,000
Common Stock* ……………………………………………
100,000
Common Stock** ……………………………………….
300,000
Quick Study 11-9 (10 minutes)
Mar. 2
Retained Earnings ………………………………………..
120,000
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Quick Study 11–10 (10 minutes)
Quick Study 11–11 (5 minutes)
1.
Cash* ………………………………………………………………..
510,000
Preferred Stock, $100 Par Value** ………………….
500,000
Quick Study 11-12 (10 minutes)
Total cash dividend ……………………………………………………………..
$110,000
To preferred shareholders ……………………………………………………
Quick Study 11–13 (30 minutes)
Noncumulative
Preferred
Common
Year 1 ($800 paid)
Preferred* …………………………………………..
$ 800
Common⎯remainder …………………………..
$ 0
Totals for the year ………………………………
$ 0
Year 2 ($1,700 paid)
Preferred* …………………………………………..
Common⎯remainder …………………………..
$ 700
Totals for the year ………………………………
Wild & Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 11
Quick Study 11–14 (20 minutes)
Cumulative
Preferred
Common
Year 1 ($800 paid)
Preferred* …………………………………………..
$ 800
Common⎯remainder …………………………..
_______
$ 0
$ 800
$ 0
Year 2 ($1,700 paid)
Preferred⎯arrears from Year 1 …………….
$ 200
Preferred* …………………………………………..
Common⎯remainder …………………………..
_______
$ 500
Quick Study 11-15 (10 minutes)
Total
Assets
Total
Liabilities
Total
Equity
Issued $12,000 of common stock for cash
Increase
No effect
Increase
Issued $23,000 of common stock for land
Increase
No effect
Increase
Issued $5,000 of preferred stock for cash
Increase
No effect
Increase
Quick Study 11-16 (5 minutes)
90,000 shares issued
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Quick Study 11-17 (10 minutes)
May 3
Treasury Stock (4,000 shares) ……………………….
36,000
Cash ………………………………………………………..
36,000
Paid-In Capital, Treasury Stock ………………..
Quick Study 11-18 (10 minutes)
1. No Effect
Quick Study 11-19 (15 minutes)
WESTWORLD INC.
Stockholders’ Equity Section of Balance Sheet
December 31
Preferred stock …………………………………………………………………….
$ 7,000
Paid-in capital in excess of par value, preferred stock ……………
3,000
Common stock ……………………………………………………….……………
Paid-in capital in excess of par value, common stock …………….
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Quick Study 11–20 (10 minutes)
1. Prior period adjustment
This material error should be reported on the statement of retained
2. Change in accounting estimate
3. Prior period adjustment
Quick Study 11–21 (10 minutes)
Beginning retained earnings ………………………………………………..
$ 20,000
Cash dividends ……………………………………………………………………
Quick Study 11-22 (10 minutes)
Quick Study 11-23 (10 minutes)
Wild & Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 11
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Quick Study 11-24 (10 minutes)
Analysis: Competitor. The stock with a PE of 5.2 is lower than its
competitor’s PE of 9.5. This means the market has a higher expectation of
Quick Study 11-25 (10 minutes)
Analysis: Income stock. The company’s dividend yield of 7.2% indicates that
Wild & Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 11
EXERCISES
Exercise 11-1 (15 minutes)
Characteristic
Corporations
1.
Owner authority and control…………….
e. One vote per share
2.
Ease of formation …………………………...
a. Requires government approval
3.
4.
5.
7.
c. Separate legal entity
Exercise 11-2 (15 minutes)
Exercise 11-3 (15 minutes)
1.
Feb. 20
Cash ……………………………………………………………
152,000
Common Stock, $2 Par Value* …………………
38,000
2.
Feb. 20
Cash ……………………………………………………………
152,000
Common Stock, No-Par Value …………………
Issued common stock for cash.
3.
Feb. 20
Cash ……………………………………………………………
152,000
Common Stock, $5 Stated Value* …………….
95,000
Common Stock** ………………………………….
57,000
Wild & Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 11
Exercise 11-4 (15 minutes)
1.
Cash ……………………………………………………………………..
35,000
Common Stock, $5 Par Value* ………………………….
20,000
2.
Organization Expenses ………………………………………….
40,000
Common Stock, $1 Stated Value ……………………….
2,000
Common Stock ……………………………………………..
38,000
3.
Organization Expenses ………………………………………….
40,000
Common Stock, No-Par Value …………………………..
40,000
4.
Cash ……………………………………………………………………..
60,000
Preferred Stock, $50 Par Value* ………………………..
50,000
Paid-In Capital in Excess of Par Value,
Wild & Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 11
Exercise 11-5 (15 minutes)
1.
Assets
=
Liabilities
+
Equity
+20,000
2.
Assets
=
Liabilities
+
Equity
Organization Expenses
–40,000
3.
Assets
=
Liabilities
+
Equity
Organization Expenses
–40,000
Common Stock, No–Par Value
+40,000
4.
Assets
=
Liabilities
+
Equity
Exercise 11-6 (15 minutes)
Land ……………………………………………………………………..
45,000
Building ………………………………………………………………..
85,000
Wild & Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 11
Exercise 11-7 (10 minutes)
Total Assets
Total Liabilities
Total Equity
$5,000 cash dividend
Decrease
No effect
Decrease
Exercise 11-8 (20 minutes)
1.
SHARPER CORPORATION
Stockholders’ Equity Section of the Balance Sheet
June 30
Common stock⎯$10 par value, 75,000 shares issued and
outstanding ……………………………………………………………..
$ 750,000
Paid-in capital in excess of par value, common stock ..
200,000
2. Number of outstanding shares
Outstanding shares before the dividend ………………..
50,000
25,000
Wild & Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 11
Exercise 11-9 (15 minutes)
1.
SHARPER CORPORATION
Stockholders’ Equity Section of the Balance Sheet
June 30
Common stock⎯$3.33 (rounded) par value, 150,000 shares
issued and outstanding ………………………………………………..
$ 500,000
2. Number of outstanding shares
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Exercise 11-10 (25 minutes)
1.
Retained Earnings* ………………………………………
480,000
Common Stock Dividend Distributable** ….
120,000
Paid-In Capital in Excess of Par Value,
Common Stock Dividend Distributable …………
120,000
Common Stock, $10 Par Value ………………..
120,000
Distributed common stock dividend.
2.
TVX COMPANY
Stockholders’ Equity Section of the Balance Sheet
February 28
Common stock⎯$10 par value, 150,000 shares authorized,
72,000 shares issued and outstanding ……………………………….
$ 720,000
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Exercise 11-11 (30 minutes)
Non-Cumulative
Preferred
Common
Year 1 ($20,000 paid)
Preferred* …………………………………………..
$ 20,000
Common⎯remainder …………………………..
_______
$ 0
Totals for the year ………………………………
$ 20,000
$ 0
Year 2 ($28,000 paid)
Preferred* …………………………………………..
$ 28,000
Common⎯remainder …………………………..
_______
$ 0
Totals for the year ………………………………
$ 28,000
$ 0
Year 3 ($200,000 paid)
Preferred* …………………………………………..
$ 30,000
Common⎯remainder …………………………..
_______
$170,000
Totals for the year ………………………………
$ 30,000
$170,000
Year 4 ($350,000 paid)
Preferred* …………………………………………..
$ 30,000
Common⎯remainder …………………………..
_______
$320,000
Totals for the year ………………………………
$ 30,000
$320,000
_______
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Exercise 11-12 (25 minutes)
Cumulative
Preferred
Common
Year 1 ($20,000 paid)
Preferred* …………………………………………..
$ 20,000
Common⎯remainder …………………………..
_______
$ 0
Totals for the year ………………………………
$ 20,000
$ 0
Year 2 ($28,000 paid)
Preferred⎯arrears from Year 1 …………….
$ 10,000
Preferred* …………………………………………..
18,000
Common⎯remainder …………………………..
_______
$ 0
Totals for the year ………………………………
$ 28,000
$ 0
(Note: $12,000 in preferred stock dividends in arrears.)
Preferred⎯arrears from Year 2 …………….
$ 12,000
Preferred* …………………………………………..
30,000
Common⎯remainder …………………………..
_______
$158,000
Totals for the year ………………………………
$ 42,000
$158,000
Preferred* …………………………………………..
$ 30,000
Common⎯remainder …………………………..
_______
$320,000
Totals for the year ………………………………
$ 30,000
$320,000
Year 1 – Year 4 ($598,000 paid)
_______
_______
Totals for four years …………………………...
$120,000
$478,000
Wild & Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 11
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Exercise 11-13 (25 minutes)
1. (a)
Treasury Stock (5,000 x $25) …………………………
125,000
Cash ………………………………………………………
125,000
Purchased treasury stock.
Treasury Stock (1,000 x $25) ……………………
Paid-In Capital, Treasury Stock ……………….
Treasury Stock (4,000 x $25) ……………………
100,000
2. Revised equity section appears as follows
Common stock⎯$10 par value; 72,000 shares authorized
and issued; 5,000 shares in treasury …………………………………….
$ 720,000
Explanation of Changes:
(i) The common stock account description line will change. After the treasury stock
purchase, it should read:
Common stock⎯$10 par value; 72,000 shares authorized and issued;
5,000 shares in treasury …………………………..……………………………………….
$720,000
The dollar balance of this account does not change with a treasury stock purchase.
……………………………………………………………………………………………………………….
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Exercise 11-14 (20 minutes)
DRACO CORPORATION
Stockholders’ Equity Section of the Balance Sheet
December 31
Preferred stock⎯$10 par value; 3,000 shares authorized;
1,000 shares issued and outstanding …………………………………..
$ 10,000
Common stock⎯$2 par value, 20,000 shares
*Retained earnings calculation
Beginning retained earnings ……………………………………………………………….
$ 0
Net income ………………………………………………………………………………………….
Less dividends ……………………………………………………………………………………
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Exercise 11-15 (15 minutes)
TUCSON CO.
Balance Sheet
December 31
Assets
Current assets
Cash ………………………………………………………………………… $20,000
Liabilities
Current liabilities
Accounts payable …………………………………………………….. $ 4,000
Equity
Preferred stock ……………………………………………………………. $ 8,000
Paid-in capital in excess of par value, preferred stock ….. 2,000