ALTERNATE PROBLEMS
AP11–1.
2. Additional paid-in capital: $118,500,000 (all shares were issued for $80. Subtract
3. Earnings per share: $4,800,000 1,400,000 shares = $3.43
4. Dividend per share: $2 per share x 1,400,000 shares = $2,800,000.
AP11–2.
(a)
Cash (+A) (30,000 shares x $40) + (5,000 shares x $26) …..
1,330,000
Common stock, (+SE) (30,000 shares x $40) ……………….
1,200,000
Preferred stock (+SE) (5,000 shares x $5) ……………………
25,000
Additional paid-in capital, preferred (+SE)
[(5,000 shares x $26) – (5,000 shares x $5)] ………………
105,000
Sold common stock at $40 and preferred stock at $26.
(b)
Cash (+A) (2,000 shares x $32) ……………………………………..
64,000
Preferred stock (+SE) (2,000 shares x $5) ……………………
10,000
Additional paid-in capital, preferred (+SE)
[(2,000 shares x $32) – (2,000 shares x $5)] ………………
54,000
Sold preferred stock at $32.
(c)
Treasury stock, common (+XSE, –SE) (3,000 shares x $38)
Purchased treasury stock at $38.
Financial Accounting, 9/e 11–33
AP11–3.
Stockholders’ Equity
Common stock, $5 par value, 1,000,000 shares authorized; 700,000
shares issued, 675,000 shares outstanding ………………………………………
$ 3,500,000
AP11–4.
Req. 1
Case A—Preferred is noncumulative and the total amount to distribute is $25,000:
Preferred
(21,000
shares)
Common
(500,000
shares)
Total
Preferred ($210,000 x 8%) ……………………………………..
$16,800
$16,800
Balance to common ($25,000 – $16,800) …………………
$8,200
8,200
$16,800
$8,200
$25,000
Per share …………………………………………………………….
$.016
Preferred:
Arrears ($210,000 x 8% x 2 years = $33,600) ………..
$25,000
$25,000
Current year ($210,000 x 8%) ……………………………..
$25,000
$25,000
Per share …………………………………………………………….
$1.19
Preferred:
Arrears ($210,000 x 8% x 2 years) ……………………….
$33,600
Current year ($210,000 x 8%) ……………………………..
16,800
Balance to common ($75,000 – $33,600 – $16,800) …..
$24,600
24,600
$24,600
$75,000
Per share …………………………………………………………….
$.049
Additional paid-in capital, common …………………………………………………….
Retained earnings …………………………..………………………………………………
Treasury stock (25,000 shares x $50) ………………………………………………..
AP11–4 (continued).
Req. 2
Schedule of Comparative Differences
Item
Amount of Dollar Increase (Decrease)
Cash Dividend – Case C
Stock Dividend
Assets
$75,000 decrease in cash
$0, no effect.
date. The net effect is zero.
Financial Accounting, 9/e 11–35
CONTINUING PROBLEM
CON11–1
Req. 1
Req. 2
March 2
Retained earnings (-SE) ………………………………………………..
9,460,000
Dividend payable (+L) ………………………………………………..
9,460,000
March 12
No entry
March 26
Dividend payable (-L) ……………………………………………………
9,460,000
Cash (-A) …………………………………………………………………
9,460,000
Treasury Stock (+XSE, -SE)) …………………………………………
Cash (-A) ………………………………………………………………..
Comprehensive Review Problem (Chapter 9, 10, 11)
Case A
Req. 1
Preferred stock dividend — $2,160 = 3,000 shares outstanding x $8 x 9%
Common stock dividend—$7,840 = $10,000 – $2,160
Req. 3
Cash (+A) …………………………..……………………………………….
25,000
Treasury stock (-XSE, +SE) ………………………………………..
20,000
Additional paid-in capital (+SE) ………………………………….
5,000
Req. 4
A journal entry is not required to record a stock split so there is not affect on the balance
Case B
Working Capital
Remain the same
Decrease
Remain the same
Remain the same
Financial Accounting, 9/e 11–37
Case C
Req. 1
$1,000,000 x 0.61391 ……………………………………………
$ 613,910
$50,000 x 7.72173 ………………………………………………..
386,087
Issue price …………………………………………………………..
$999,997*
Req. 2
$1,000,000 x 0.67556 ……………………………………………
$ 675,560
$50,000 x 8.11090 ………………………………………………..
405,545
Issue price …………………………………………………………..
$1,081,105*
Req. 3
$1,000,000 x 0.55839 ……………………………………………
$ 558,390
$50,000 x 7.36009 ………………………………………………..
368,005
Issue price …………………………………………………………..
$ 926,395
Case D
Req. 1
Computations:
Interest:
$1,000,000 x 5%
=
$ 50,000
Present value:
$1,000,000 x 0.45639
=
$ 50,000 x 13.59033
=
=
11–38 Solutions Manual
USING A PREMIUM ACCOUNT
Cash (+A) ……………………………………………………………………
1,135,907
WITHOUT USING A PREMIUM ACCOUNT
Cash (+A) ……………………………………………………………………
1,135,907
Bonds Payable (+L) ………………………………………………….
1,135,907
Req. 2
Cash (+A) (45,000 shares x $25) ……………………………………
1,125,000
Additional paid-in capital, common stock (+SE) …………….
Bonds Payable (+L) ………………………………………………….
1,000,000
CASES AND PROJECTS
FINANCIAL REPORTING AND ANALYSIS CASES
CP11–1.
Req. 1 The Company does report treasury stock on its balance sheet in the
amount of $965,566,000.
CP11–2.
Req. 1 200,000,000 shares of common stock are authorized; 130,502,864 shares
are issued and outstanding in the latest year.
11–40 Solutions Manual
CP11–3.
Req.1
Urban Outfitters
American Eagle
Dividends per share
Market price per share
0
$40
= 0.00%
0.50
$20
= 2.50%
Req. 2
CP11–4.
5.9 billion shares outstanding x $1.82 per share = $10.7 billion
Total amount of cash paid to stockholders is $10.7 billion.
CRITICAL THINKING CASES
CP11–5.
It is true that a stock dividend will not require the company to pay stockholders any
CP11–6.
We do not have an easy answer to this question. We use this case to discuss corporate
governance and responsibilities to employees as well as stockholders (owners).
FINANCIAL REPORTING AND ANALYSIS PROJECTS
Financial Accounting, 9/e 11–41
CP11–7.
Student response depends on the company selected.