CHAPTER 11
SOLUTIONS TO EXERCISES—SET B
EXERCISE 11-1B
(a) Jan. 10 Cash (20,000 X $5) …………………………. 100,000
Common Stock ……………………….. 100,000
(b) Jan. 10 Cash (20,000 X $5) …………………………. 100,000
Paid-in Capital in Excess of
Stated Value—Common Stock
EXERCISE 11-2B
June 12 Cash …………………………………………………. 400,000
EXERCISE 11-2B (Continued)
July 11 Cash (3,000 X $102) …………………………... 306,000
Preferred Stock (3,000 X $100) ……. 300,000
EXERCISE 11-3B
(a) Feb. 1 Cash (40,000 X $52) …………………………. 2,080,000
Preferred Stock
(40,000 X $50) ………………………… 2,000,000
(b)
Preferred Stock
Paid-in Capital in Excess of
Par Value—Preferred Stock
2/1 2,000,000
2/1 80,000
7/1 3,000,000
7/1 240,000
5,000,000
320,000
(c) Preferred Stock—listed first in paid-in capital under capital stock. Paid
EXERCISE 11-4B
(a) Common stock outstanding is 590,000 shares. (Issued shares 600,000
less treasury shares 10,000.)
EXERCISE 11-5B
May 2 Cash (8,000 X $12) ……………………………… 96,000
Common Stock (8,000 X $5) …………. 40,000
Paid-in Capital in Excess of Par
EXERCISE 11-6B
(a) June 15 Cash Dividends
(69,000* X $1.00) ……………………….. 69,000
Dividends Payable ………………… 69,000
(b) In the retained earnings statement, dividends of $142,000 will be
EXERCISE 11-7B
Before
Action
After Stock
Dividend
After Stock
Split
548,000
EXERCISE 11-8B
WELLS FARGO & COMPANY
Partial Balance Sheet
December 31, 2017
(in millions)
Stockholders’ equity
Paid-in capital
Capital stock
Preferred stock ………………………………………….. $ 450
Common stock,
$123
par value,
EXERCISE 11-9B
MARVEL CORPORATION
Partial Balance Sheet
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
8% Preferred stock, $100 par
value, noncumulative, 5,000
shares issued ………………………………. $ 500,000
Common stock, no par, $5
EXERCISE 11-10B
SYCAMORE INC.
Partial Balance Sheet
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
8% Preferred stock, $50 par value,
40,000 shares authorized,
Additional paid-in capital
Paid-in capital in excess of par value—
preferred stock …………………………….. 24,000
Paid-in capital in excess of stated value—
EXERCISE 11-11B
2017 2016
Payout ratio
$298 = 59.1%
$504
$411= 68.5%
$600
EXERCISE 11-12B
2017 2016
Payout ratio
$394
$2,157 = 18.3%
$326
$2,041= 16.0%
EXERCISE 11-13B
(a) 2017:
$170,000 =17%
$1,000,000
EXERCISE 11-13B (Continued)
(b) Juarez Corporation’s net income increased in part because it retired
bonds and eliminated the interest expense associated with the bonds.
Such an increase in income would produce an increase in return on
(c) 2017:
$300,000
$1,200,000 =25%
EXERCISE 11-14B
(a)
Plan One
Issue Stock
(b)
Plan Two
Issue Bonds
Income before interest and taxes ………
$800,000
$800,000
Interest ($2,000,000 X 8%) …………………
Income before taxes …………………………
Income tax expense (30%) ………………..
Net income ……………………………………….
$560,000
$448,000
Outstanding shares ………………………….
Earnings per share …………………………...
EXERCISE 11-15B
(a)
2016
2017
Pre-debt net income ………………………….
$110,000
$110,000
Net income ……………………………………….
$110,000
$ 85,000
Outstanding shares ………………………….
Earnings per share …………………………...
Adjustment for interest expense
(b)
2016
2017
Net income
$ 110,000
$500,000
$ 85,000
(c)
Total liabilities
$0
$1,000,000
$1,000,000
$500,000
*EXERCISE 11-16B
(a) Stock Dividends (18,000* X $15) ……………………. 270,000
Common Stock Dividends
(b) Stock Dividends (27,000* X $8) ……………………… 216,000
Common Stock Dividends