Exercise 11-17 (30 minutes)
1. Net income …………………………………………………………………………..
$960,000
Less preferred dividends ……………………………………………………
(120,000)
Net income available to common stockholders …………………..
$840,000
2. Net income available to common stockholders ………………..
Divided by weighted-average outstanding shares ……………….
Exercise 11-18 (15 minutes)
Stock
Market Value
per Share
Divided
by
Earnings
per Share
Price-Earnings
Ratio
Hilton …..
$176.40
$12.00
=
14.7
SPG ……..
96.00
10.00
=
9.6
Hyatt ……
=
12.5
Accor …..
=
Exercise 11-19 (15 minutes)
Stock
Annual Cash
Dividend
Divided
by
Market
Value
Dividend Yield
Etihad ….
$16.06
$220.00
=
7.3%
United ….
13.86
132.00
=
10.5
Lingus ….
3.96
72.00
=
5.5
Allied ……
0.48
80.00
=
0.6
1.
Total stockholders’ equity ………………………………………
$1,585,000
Less equity applicable to preferred shares
Preferred Stock ($25 x 10,000) ………………………………
$250,000
Cumulative dividends in arrears (none) …………………
0
(250,000)
Equity applicable to common shares ………………………
$1,335,000
Book value of common stock ($1,335,000/100,000) ….
$ 13.35
2.
Total stockholders’ equity ………………………………………
Less equity applicable to preferred shares
Preferred Stock ($25 x 10,000) ………………………………
45,000
(295,000)
Book value of common stock ($1,290,000/100,000) ….
Exercise 11–21 (40 minutes)
Part 1
Jan. 2
Treasury Stock, Common ………………………………………
75,000
Cash ………………………………………………………………..
75,000
Purchased treasury stock (3,000 x $25).
Jan. 7
Retained Earnings …………………………………………………
40,500
Common Dividend Payable …………………………..
40,500
Feb. 28
Common Dividend Payable ……………………………………
40,500
Cash ………………………………………………………………..
40,500
Paid cash dividend.
July 9
Cash* …………………………………………………………………….
36,000
Treasury Stock, Common** …………………………..
30,000
Paid-In Capital, Treasury Stock*** …………………….
Reissued treasury stock.
*(1,200 x $30) **(1,200 x $25) ***(1,200 x $5)
Aug. 27
Cash* …………………………………………………………………….
30,000
Paid-In Capital, Treasury Stock …………………………..
6,000
Retained Earnings …………………………………………………
1,500
Treasury Stock, Common** …………………………..
37,500
Reissued treasury stock.
*(1,500 x $20) **(1,500 x $25)
Sept. 9
Retained Earnings …………………………………………………
59,400
Common Dividend Payable …………………………..
59,400
Declared $2 dividend on 29,700 outstanding shares.
Oct. 22
Common Dividend Payable ……………………………………
59,400
Cash ………………………………………………………………..
59,400
Paid cash dividend.
Dec. 31
Income Summary …………………………………………………..
52,000
Retained Earnings ……………………………………………
52,000
Closed Income Summary account.
Exercise 11–21 (Concluded)
Part 2
ALEXANDER CORPORATION
Statement of Retained Earnings
For Year Ended December 31, 2019
Retained earnings, Dec. 31, 2018 ……………………………..
$340,000
Plus net income ………………………………………………………
52,000
Treasury stock reissuances* …………………………..
Part 3
ALEXANDER CORPORATION
Stockholders’ Equity Section of the Balance Sheet
December 31, 2019
Common stock⎯$25 par value, 50,000 shares
authorized, 30,000 shares issued and outstanding;
300 shares in treasury …………………………………………….
$ 750,000
Paid-in capital in excess of par value, common stock …
50,000
Retained earnings (from part 2) ……………………………………..
290,600
Less cost of treasury stock ……………………………………….
PROBLEM SET A
Problem 11-1A (30 minutes)
Part 1
a. To record sale of 10,000 ($250,000/$25 per share) shares of $25 par
value common stock for $30 ($300,000/10,000 shares) per share.
b. To record issuance of 5,000 ($125,000/$25 per share) shares of $25
par value common stock to the company’s promoters for their efforts
in organizing the company when the market value is $30
($150,000/5,000 shares) per share.
Part 2
Number of outstanding shares
Issued in (a) …………………………………
10,000
Issued in (b) …………………………..…….
5,000
Issued in (c) …………………………………
2,000
Issued in (d) …………………………..…….
3,000
Total …………………………………………….
20,000
Part 3
Total paid-in capital from common stockholders
From transaction (a) ……………………
$300,000
From transaction (b) ……………………
150,000
From transaction (c) ……………………
80,000
From transaction (d) ……………………
120,000
Total paid-in capital …………………….
$650,000
Problem 11-2A (60 minutes)
Part 1
Jan. 2
Treasury Stock, Common ………………………………………
80,000
Cash ………………………………………………………………..
80,000
Purchased treasury stock (4,000 x $20).
Jan. 5
Retained Earnings …………………………………………………
72,000
Common Dividend Payable …………………………..
72,000
Declared $2 dividend on 36,000 outstanding shares.
Common Dividend Payable ……………………………………
72,000
Cash ………………………………………………………………..
72,000
Paid cash dividend.
July 6
Cash* …………………………………………………………………….
36,000
Treasury Stock, Common** …………………………..
30,000
Paid-In Capital, Treasury Stock*** …………………….
Reissued treasury stock.
*(1,500 x $24) **(1,500 x $20) ***(1,500 x $4)
Aug. 22
Cash* …………………………………………………………………….
42,500
Paid-In Capital, Treasury Stock …………………………..
6,000
Retained Earnings …………………………………………………
1,500
Treasury Stock, Common** …………………………..
50,000
Reissued treasury stock.
*(2,500 x $17) **(2,500 x $20)
Sept. 5
Retained Earnings …………………………………………………
80,000
Common Dividend Payable …………………………..
80,000
Declared $2 dividend on 40,000 outstanding shares.
Oct. 28
Common Dividend Payable ……………………………………
80,000
Cash ………………………………………………………………..
80,000
Paid cash dividend.
Dec. 31
Income Summary …………………………………………………..
Retained Earnings ……………………………………………
Closed Income Summary account.
Problem 11-2A (Concluded)
Part 2
KOHLER CORPORATION
Statement of Retained Earnings
For Year Ended December 31, 2019
Retained earnings, Dec. 31, 2018 ……………………………..
$270,000
Plus net income ………………………………………………………
388,000
658,000
Treasury stock reissuances …………………………...
Part 3
KOHLER CORPORATION
Stockholders’ Equity Section of the Balance Sheet
December 31, 2019
Common stock⎯$10 par value, 100,000 shares
authorized, 40,000 shares issued and outstanding …..
$400,000
Paid-in capital in excess of par value, common stock ..
60,000
504,500
Problem 11-3A (45 minutes)
Part 1
Explanations for each of the journal entries
Oct. 2
Declared a cash dividend of $2 per share of common stock.
($60,000 / 30,000 shares)
Oct. 25
Paid the cash dividend on common stock.
Oct. 31
Declared a 10% stock dividend when the market value is $25 per
share. ($36,000/$12 par = 3,000 shares = 10% of 30,000 shares;
$75,000/3,000 shares = $25 per share)
Executed a 3-for-1 stock split. ($12 par / $4 par = 3–for-1 ratio)
Part 2
Sep. 30
Beg. Bal.
Oct. 2
Oct. 25
Oct. 31
Nov. 5
Dec. 1
Dec. 31
Common stock ………….
$360,000
$360,000
$360,000
$360,000
$396,000
$396,000
$396,000
Common stock
dividend distributable
0
0
0
36,000
0
0
0
Total equity ……………….
$710,000
$710,000
$710,000
$710,000
$710,000
$920,000
Problem 11-4A (45 minutes)
Part 1
Outstanding common shares
Jan. 5
Apr. 5
July 5
Oct. 5
Beginning balance …………………….
40,000
40,000
40,000
40,000
Less treasury stock (Mar. 20) ……..
(3,000)
(3,000)
(3,000)
Plus dividend shares (July 31)* …….
______
______
______
7,400
Outstanding shares ……………………
40,000
37,000
37,000
44,400
*(20% x 37,000)
Part 2
Jan. 5
Apr. 5
July 5
Oct. 5
Total dividend ………………………….
Part 3
Capitalization of retained earnings for small stock dividend
Number of shares ………………………………………………………………
7,400
Market value per share ……………………………………………………….
x $12
Total capitalized …………………………………………………………………
$ 88,800
Part 4
Cost per share of treasury stock
Total amount paid ………………………………………………………………
$ 30,000
Shares purchased ……………………………………………………………..
÷ 3,000
Cost per share …………………………………………………………………..
$ 10
Retained earnings, beginning balance ………………………………..
$320,000
Less dividends: Jan. 5 …………………………..…………………………
Total before net income ……………………………………………………..
$152,000
?
Retained earnings, ending balance …………………………………….
$400,000
Therefore, net income = $248,000
Problem 11-5A (40 minutes)
1. Computation of par values of stock
Preferred: Paid-in amount / Number of shares = $50,000 / 1,000 = $50
Common: Paid-in amount / Number of shares = $80,000 / 4,000 = $20
2. Book value with no dividends in arrears
Common stock
Total equity …………………………………………
$280,000
Less equity for preferred ……………………..
Common stock equity ………………………….
$230,000
Number of outstanding shares …………….
4,000
Book value per common share …………….
$ 57.50
($230,000 / 4,000 shares)
3. Book value with two years’ dividends in arrears
Common stock
Total equity …………………………………………..
$280,000
Less preferred stock par value ………………
Less two years’ dividends in arrears* …….
(50,000)
(5,000)
Common stock equity …………………………..
$225,000
*2 years’ dividends = 2 x ($50,000 x 5%) = $5,000
Number of outstanding shares ………………
4,000
Book value per common share ………………
$ 56.25
($225,000/4,000 shares)
4. Dividend allocation in total
Preferred
Common
Total
Remainder to common …………………
PROBLEM SET B
Problem 11-1B (30 minutes)
Part 1
a. To record sale of 3,000 ($3,000/$1 per share) shares of $1 par value
common stock for $40 ($120,000/3,000) per share.
b. To record issuance of 1,000 ($1,000/$1 per share) shares of $1 par value
common stock to the company’s promoters for their efforts in
organizing the company when the market value is $40 per share.
Part 2
Number of outstanding shares
Issued in (a) ……………………………………
3,000
Issued in (b)……………………………………
1,000
Issued in (c) ……………………………………
800
Issued in (d)……………………………………
1,200
Total ………………………………………………
6,000
Part 3
Total paid-in capital from common stockholders
From transaction (a) ……………………….
$120,000
From transaction (b) ……………………….
40,000
From transaction (c) ……………………….
40,000
From transaction (d) ……………………….
60,000
Total paid-in capital ………………………..
$260,000
Problem 11-2B (60 minutes)
Part 1
Jan. 10
Treasury Stock, Common ………………………………………
480,000
Cash ………………………………………………………………..
480,000
Purchased treasury stock (40,000 x $12).
Mar. 2
Retained Earnings …………………………………………………
240,000
Common Dividend Payable …………………………..
240,000
Declared $1.50 dividend on 160,000 outstanding shares.
Cash ………………………………………………………………..
240,000
Paid cash dividend.
Nov. 11
Cash* …………………………………………………………………….
312,000
Treasury Stock, Common** …………………………..
288,000
Paid-In Capital, Treasury Stock*** ……………………..
Reissued treasury stock.
*(24,000 x $13) **(24,000 x $12) ***(24,000 x $1)
Nov. 25
Cash* …………………………………………………………………….
152,000
Paid-In Capital, Treasury Stock …………………………..
24,000
Retained Earnings …………………………………………………
16,000
Treasury Stock, Common** …………………………..
192,000
Reissued treasury stock.
*(16,000 x $9.50) **(16,000 x $12)
Dec. 1
Retained Earnings …………………………………………………
500,000
Common Dividend Payable …………………………..
500,000
Dec. 31
Income Summary …………………………………………………..
Retained Earnings ……………………………………………
Closed Income Summary account.
Problem 11-2B (Concluded)
Part 2
BALTHUS CORP.
Statement of Retained Earnings
For Year Ended December 31, 2019
Retained earnings, Dec. 31, 2018……………………………….
$2,160,000
Plus net income ………………………………………………………..
1,072,000
3,232,000
Treasury stock reissuances …………………………….
(16,000)
Part 3
BALTHUS CORP.
Stockholders’ Equity Section of the Balance Sheet
December 31, 2019
Common stock⎯$1 par value, 320,000 shares
authorized, 200,000 shares issued and outstanding ….
$ 200,000
Paid in capital in excess of par value, common stock …
1,400,000
Retained earnings (from part 2) ………………………………………