Financial Accounting, 9/e 11–21
Comments: Neither the stock dividend nor stock split changed total stockholders’ equity
because neither involved the disbursement of assets. The stock dividend transferred
E11–24.
Comparative results:
Items
Before Dividend
and Split
After Stock
Dividend
After Cash
Dividend
Common stock account
$640,000
$896,000
$640,000
Par per share
Shares outstanding
80,000
Additional paid-in capital
$ 280,000
Retained earnings
$2,860,000
Comments: The stock dividend does not change total stockholders’ equity because it
does not involve the disbursement of assets. The stock dividend reduced retained
earnings and increased the common stock account by the same amount; it increased
shares outstanding but did not change par value per share. The cash dividend required
the disbursement of assets (cash) and a similar reduction of the retained earnings
account in the stockholders’ equity section of the balance sheet.
Req. 2
E11–25.
Req. 1
MATSUMOTO TRAINING
Statement of Owners’ Equity
Tanaka capital, Beginning of the year
$ 0
Add: Investments during the year
500,000
Add: Net income during the year
Total
545,000
Less: Withdrawals during the year
Tanaka capital, End of the year
$ 515,000
Req. 2
GALAXY ROBOTICS
Statement of Owners’ Equity
Curtis
Wilson
Total
$ 0
$ 0
$ 0
300,000
300,000
600,000
$ 315,000
PROBLEMS
P11–1.
1.
Shares authorized (given) ……………………………………………………………….
200,000
Shares issued ($2,125,000 $17) ……………………………………………………
125,000
Shares outstanding (125,000 – 3,000) ………………………………………………
122,000
3. Earnings per share: $240,340 122,000 shares = $1.97
5. Treasury stock is listed as a negative amount in the stockholders’ equity section of
the balance sheet. Amount: 3,000 shares x $20 cost = $60,000.
6. After a 2-for-1 stock split, the par value per share will be cut in half: $10 2 = $5.
8. The stock dividend is considered a small stock dividend so the market price is used
in the journal entry:
Retained earnings (-SE) (122,000 shares x .10 x $21) ………
256,200
Common stock (+SE) (122,000 shares x .10 x $10) ……….
122,000
Additional paid-in capital (+SE) (remainder) ………………….
134,200
P11–2.
Stockholders’ Equity
Common stock (50,000 shares authorized; 43,000 shares issued and
outstanding) …………………………..……………………………………………….
344,000
outstanding) …………………………..……………………………………………….
Preferred stock (21,000 shares authorized; 6,500 shares issued and
Calculations:
• Common stock: 43,000 shares x $8 par value.
• Preferred stock: 6,500 shares x $10 par value.
• Additional paid-in capital, common stock: [(40,000 shares x $12) + (3,000 shares x
$15)] – (43,000 shares x $8 par value).
Financial Accounting, 9/e 11–25
P11–3.
(a)
Cash (+A) (66,000 shares x $9) ……………………………………..
594,000
Common stock (+SE) (66,000 shares x $5) ………………….
330,000
Additional paid-in capital, common stock (+SE)
(remainder) ……………………………………………………………
264,000
(c)
Cash (+A) (1,000 shares x $20) + (2,500 shares x $10) ……
45,000
Preferred stock (+SE) (1,000 shares x $10) ………………….
10,000
Common stock (+SE) (2,500 shares x $5) ……………………
12,500
Additional paid in capital, preferred stock (+SE)
(remainder) ……………………………………………………………
Additional paid-in capital, common stock (+SE)
(remainder) ……………………………………………………………
P11–4.
Req. 1 (in millions)
(a)
Cash (+A) ……………………………………………………………………
598
Common stock (+SE) ……………………………………………….
598
Req. 2 (in millions)
(a)
Cash (+A) ……………………………………………………………………
598
552
P11–5.
.
(b)
Cash (+A) (9,000 shares x $20) ……………………………………..
180,000
Preferred stock (+SE) (9,000 shares x $10) ………………….
90,000
Additional paid-in capital, preferred stock (+SE)
(remainder) ……………………………………………………………
Stockholders’ Equity
P11–6.
Req. 1
A stock dividend involves distributing additional shares of a company’s stock to
existing stockholders. A cash dividend involves distributing cash to existing
stockholders.
Req. 2
additional shares that are less than 20–25% of the outstanding shares.
Req. 3
Reselling treasury stock does not affect the income statement, regardless of
whether it is resold for a price higher or lower than its purchase price. Reselling
treasury stock does affect the statement of cash flows. The cash received when the
shares are resold is reported as a financing activity cash inflow.
Req. 4
P11–7.
Financial Accounting, 9/e 11–27
Req. 1
Treasury Stock (+XSE, –SE) ………………………………………….
45,000
Cash (-A) ……………………………………………………….
45,000
P11–8.
Req. 1
Case A—Preferred is noncumulative and the total amount to distribute is $31,000:
Preferred
(8,000
shares)
Common
(35,000
shares)
Total
Preferred ($120,000 x 10%) …………………………………..
$ 12,000
$ 12,000
Balance to common ($31,000 – $12,000) ………………..
$19,000
19,000
$ 12,000
$19,000
$31,000
Per share ……………………………………………………………
Preferred:
Arrears ($120,000 x 10% x 2 years) …………………….
$ 24,000
$ 24,000
Current year ($120,000 x 10%) …………………………..
12,000
12,000
Per share ……………………………………………………………
$4.50
$ –0–
Case C—Preferred is cumulative and the total amount to distribute is $90,000:
Preferred:
Arrears ($120,000 x 10% x 2 years) …………………….
$ 24,000
$ 24,000
Current year ($120,000 x 10%) …………………………..
12,000
12,000
Balance to common ($90,000 – $36,000)
Per share ……………………………………………………………
P11–8 (continued).
Req. 2
Cash (+A) ……………………………………………………………………
Treasury Stock (-XSE, +SE) …………………………..
Additional paid-in capital (+SE) …………………………..
Schedule of Comparative Differences
Item
Amount of Dollar Increase (Decrease)
Cash Dividend – Case C
Stock Dividend
P11–9.
Req. 1
Heather feels some concern about whether Scott is looking in the right place on the
Statement of Cash Flows for dividends. She shouldn’t be concerned; dividends paid are
reported in the financing activities section of the statement of cash flows.
Req. 2
To start, you should note that the statement of cash flows reports both cash inflows and
Financial Accounting, 9/e 11–29
P11–10.
Req. 1
Stockholders’ Equity
Common stock, $0.01 par value, 200,000 shares authorized,
54,000 shares issued, 52,000 shares outstanding ………………………..
$540
Req. 2
The dividend yield ratio is 4.23% ([$22,000 52,000 shares] $10). This is the return to
investors based solely on dividends. Investors receive a return from both dividends and
P11–11.
Comparative results:
Items
Before any
Dividend
After Cash
Dividend
After Stock
Dividend
After Stock
Split
Common stock account
$60,000
(given)
$60,000
$120,000
($0.10 x 1.2m)
$60,000
Par per share
$0.10
(given)
$0.10
$0.10
$0.05
($0.10 /
2)
Shares outstanding
600,000
($60k / $0.10)
600,000
1,200,000
(600k x 2)
2)
Additional paid-in capital
Cash flows from financing
$19,000
$19,000
$19,000
1,200,000
(600k x
(15,000)
P11–11 (continued).
Comments: Neither the stock dividend nor stock split changed total stockholders’ equity
because neither involved the disbursement of assets. The stock dividend transferred
P11–12.
Req. 1
Case A: Sole Proprietorship, closing entries:
A, Capital ……………………………………………………………………
20,000
Revenues ……………………………………………………………………
A, Capital ……………………………………………………………………
Case B: Partnership, closing entries:
A, Capital ……………………………………………………………………
10,000
B, Capital ……………………………………………………………………
10,000
Revenues ……………………………………………………………………
A, Capital ……………………………………………………………………
B, Capital ……………………………………………………………………
Case C: Corporation, closing entry:
Retained earnings ………………………………………………………..
20,000
Revenues ……………………………………………………………………
Financial Accounting, 9/e 11–31
P11–12. (continued)
Req. 2
Case A: Sole Proprietorship
Statement of Owner’s Equity
A, Capital, January 1 …………………………………………………….
$52,000
Case B: Partnership
Statement of Partners’ Equity
A
B
Total
Partners’ equity, January 1 ………………………….
$43,000
$43,000
$86,000
Less: Net loss …………………………………………….
Total ……………………………………………………..
Less: Withdrawals ………………………………………
Partners’ Equity, December 31 …………………….
$28,000
$26,000
Less: Net loss ………………………………………………………………
Total ……………………………………………………………………….
Less: Withdrawals ………………………………………………………..
9,000
A, Capital, December 31 ……………………………………………….
$23,000