Solutions Chapter 11 – Set B Exercises – Libby 7e
E11–1B.
Computation of End of Year Balance for Treasury Stock:
Beginning balance 380,474
Computation of Shares Outstanding:
Issued shares 3,805,961
E11–2B.
Req. 1 The number of authorized shares is specified in the corporate charter: 250,000.
E11–3B.
Req. 1
Stockholders’ Equity
Contributed capital:
Preferred stock, authorized 6,000 shares,
issued and outstanding, 5,000 shares ………………………………………………
$ 40,000
Common stock, authorized 105,000 shares,
issued and outstanding, 22,000 shares …………………………………………….
Capital in excess of par, preferred ……………………………………………………..
Capital in excess of stated value, no-par common ……………………………….
Total contributed capital ………………………………………………………………..
Total Stockholders’ Equity ……………………………………………………………..
$502,000
Req. 2
The answer would depend on the profitability of the company and the stability of its
E11–4B.
Req. 1 ($22 x 95,000 shares) – $1,900,000 = $190,000
E11–5B.
Req. 1
a.
Cash (5,800 shares x $21) (+A) ……………………………………..
121,800
Common stock (5,800 shares x $11) (+SE) ………………….
63,800
Capital in excess of par, common stock (+SE) ………………
58,000
Sold common stock at a premium.
b.
Cash (1,300 shares x $26) (+A) ……………………………………..
33,800
Common stock (1,300 shares x $11) (+SE) ………………….
14,300
Capital in excess of par, common stock (+SE) ………………
19,500
Sold common stock at a premium.
Req. 2
Stockholders’ Equity
Contributed capital:
outstanding 7,100 shares …………………………………………………………..
Total contributed capital ………………………………………………………………..
(5,000
)
Stockholders’ equity …………………………………………………………………………
Common stock, par $11, authorized 11,400 shares,
Req. 3
The company has a negative balance in retained earnings, which, in most cases, would
preclude the payment of dividends. Dividends are a distribution of earnings to the
owners. In the absence of retained earnings, dividends should not be paid.
E11–6B.
Req. 1
a.
Cash (52,000 shares x $51) (+A) ……………………………………
2,652,000
Common stock (52,000 shares x $1) (+SE) ………………….
52,000
Req. 2
Stockholders’ Equity
Contributed capital:
issued 52,000 shares ………………………………………………………………..
$ 52,000
Total contributed capital ………………………………………………………………..
)
Common stock, par $1, authorized 90,000 shares,
E11–7B.
Stockholders’ Equity
Contributed capital:
issued and outstanding, 25,000 shares ………………………………………..
Common stock, par $8 authorized 99,000 shares,
issued, 79,000 shares ……………………………………………………………….
Capital in excess of par, preferred stock ………………………………………….
Capital in excess of par, common stock …………………………………………..
Retained earnings* ……………………………………………………………………………..
Preferred stock, 8%, par $45, authorized 65,000 shares,
Capital in excess of par, common stock (+SE) ………………
Sold common stock at a premium.
b.
Treasury stock (1,100 shares x $53) (+XSE, –SE) …………….
Cash (-A) …………………………………………………………………
Bought treasury stock.
Total stockholders’ equity ………………………………………………………………
$3,145,000
*($80,000 – $20,000 = $60,000.)
E11–8B.
Req. 1
a.
Cash (16,000 shares x $20) (+A) ……………………………………
320,000
Common stock, no-par (+SE) ……………………………………..
320,000
.
Req. 2
Yes, it is ethical as long as there is a full disclosure of relevant information. In any arm’s
length transaction, an informed buyer will pay the market value of the stock.
E11–9B.
Req. 1
a.
Treasury stock (300 shares x $30) (+XSE, -SE) ……………….
9,000
Cash (-A) …………………………………………………………………
9,000
Bought treasury stock.
b.
Cash (45 shares x $35) (+A) ………………………………………….
1,575
Treasury stock (45 shares x $30) (-XSE, +SE) ……………..
1,350
Capital in excess of par (+SE) …………………………………….
Sold treasury stock.
c.
Cash (40 shares x $18) (+A) ………………………………………….
Capital in excess of par (-SE) ………………………………………..
Treasury stock (40 shares x $30) (-XSE, +SE) …………….
1,200
Sold treasury stock.
Req. 2
b.
Cash (6,000 shares x $37) (+A) ……………………………………..
222,000
Common stock, no-par (+SE) …………………………………….
222,000
c.
Cash (7,000 shares x $35) (+A) ……………………………………..
245,000
Preferred stock (7,000 shares x $10) (+SE) ………………….
Capital in excess of par, preferred (+SE) ……………………..
175,000
It is not possible to make a “profit” or “loss” on treasury stock transactions. Therefore,
these transactions do not affect the income statement.
E11–10B.
Req. 1
Preferred
(15,000
Shares)
Common
(40,000
Shares)
Total
a)
Noncumulative:
Preferred ($150,000 x 10%) ……………………………..
$ 15,000
$ 15,000
Balance to common ($265,000 – $15,000) …………
$250,000
250,000
$ 15,000
$250,000
$265,000
Per share …………………………..…………………………..
$1.00
$6.25
Req. 2
The total dividend amount and dividends per share of common stock were less under
b)
Cumulative:
Preferred, arrears ($150,000 x 10% x 3 years) ……
$ 45,000
$ 45,000
Preferred, current year ($150,000 x 10%) …………..
Balance to common ($265,000 – $45,000 – $15,000)
$205,000
205,000
$205,000
$265,000
Per share …………………………..…………………………..