Financial Accounting, 10/e 11–33
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
Revenue accounts ……………………………………………………….
144,000
164,000
A, Capital ……………………………………………………………………
Case B: Partnership, closing entries:
A, Capital ……………………………………………………………………
10,000
B, Capital ……………………………………………………………………
10,000
Revenue accounts ……………………………………………………….
144,000
164,000
A, Capital ……………………………………………………………………
B, Capital ……………………………………………………………………
Retained earnings ………………………………………………………..
20,000
Revenue accounts ……………………………………………………….
144,000
164,000
P11–12. (continued)
Req. 2
Case A: Sole Proprietorship
Statement of Owner’s Equity
A, Capital, January 1 …………………………………………………….
$52,000
Less: Net loss ………………………………………………………………
Total ……………………………………………………………………….
Less: Withdrawals ………………………………………………………..
A, Capital, December 31 ……………………………………………….
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
Financial Accounting, 10/e 11–35
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
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
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
54,000
Sold preferred stock at $32.
(c)
Treasury stock, common (+XSE, –SE) (3,000 shares x $38)
Cash (-A) …………………………………………………………………
Purchased treasury stock at $38.
AP11–3.
Stockholders’ Equity
Additional paid-in capital, common …………………………………………………….
Retained earnings …………………………………………………………………………..
Treasury stock (25,000 shares x $50) ………………………………………………..
Common stock, $5 par value, 1,000,000 shares authorized; 700,000
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
8,200
$16,800
$25,000
Case B—Preferred is cumulative and the total amount to distribute is $25,000:
Preferred:
Arrears ($210,000 x 8% x 2 years = $33,600) ………..
$25,000
$25,000
Current year ($210,000 x 8%) ……………………………..
$25,000
$ –0–
$25,000
Per share …………………………………………………………….
$1.19
$ –0–
Preferred:
Arrears ($210,000 x 8% x 2 years) ……………………….
$33,600
Current year ($210,000 x 8%) ……………………………..
$24,600
$24,600
$75,000
Per share …………………………………………………………….
$0.0492
Financial Accounting, 10/e 11–37
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.
CONTINUING PROBLEM
CON11–1
Req. 1
Treasury Stock (+XSE, -SE)) …………………………………………
146,000,000
Cash (-A) ………………………………………………………………..
146,000,000
Retained earnings (-SE) ………………………………………………..
Dividends payable (+L) ………………………………………………
March 16
No entry
March 29
Dividends payable (-L) ………………………………………………….
Cash (-A) …………………………………………………………………
Financial Accounting, 10/e 11–39
COMPREHENSIVE PROBLEM (Chapters 9-11)
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
Case B
Working Capital
1. Remain the same
2. Decrease
3. Remain the same
4. Remain the same
COMPREHENSIVE PROBLEM (continued)
Case C
Req. 1
$1,000,000 x 0.61391 ……………………………………………
$ 613,910
$50,000 x 7.72173 ………………………………………………..
Issue price …………………………………………………………..
$ 999,997
*
Req. 2
$1,000,000 x 0.67556 ……………………………………………
$ 675,560
$50,000 x 8.11090 ………………………………………………..
Issue price …………………………………………………………..
*
Req. 3
$1,000,000 x 0.55839 ……………………………………………
$ 558,390
$50,000 x 7.36009 ………………………………………………..
Issue price …………………………………………………………..
$ 926,395
*
Financial Accounting, 10/e 11–41
COMPREHENSIVE PROBLEM (continued)
Case D
Req. 1
Computations:
$1,000,000 x 0.45639
$ 50,000 x 13.59033
*
*Using Excel or a financial calculator results in a
present value of $1,135,903.
Using a Premium Account
Cash (+A) ……………………………………………………………………
1,135,907
Bonds payable (+L) ………………………………………………….
Cash (+A) ……………………………………………………………………
1,135,907
Req. 2
Cash (+A) (45,000 shares x $25) ……………………………………
1,125,000
Additional paid-in capital, common stock (+SE) …………….
CASES AND PROJECTS
ANNUAL REPORT CASES
CP11–1. (Amounts in thousands except per share amounts)
Req. 1 The Company does report treasury stock on its Balance Sheet for the
most recent fiscal year. The amount is $1,202,272.
CP11–2. (Amounts in thousands except per share amounts)
Req. 1 At the end of the most recent fiscal year as reported on its Balance Sheet,
500,000 shares of common stock are authorized; 92,647 shares are
issued; and 76,724 shares are outstanding.
CP11–3.
Req.1 American Eagle basic earnings per share: $1.15
Express basic earnings per share: $0.25
American Eagle Outfitters reports more net income per common share of stock than
Req. 2
American Eagle Outfitters paid a cash dividend of $0.50 per share during the most
recent fiscal year. Express did not declare or pay any dividends during its most recent
FINANCIAL REPORTING AND ANALYSIS CASE
CP11–4.
5.1 billion shares outstanding x $2.40 per share = $12.24 billion
Approximate cash paid to stockholders is $12.24 billion. The actual amount as stated in
CRITICAL THINKING CASES
CP11–5.
It is true that a stock dividend will not require the company to pay stockholders any
CP11–6.
FINANCIAL REPORTING AND ANALYSIS TEAM PROJECT
CP11–7.
Student response depends on the company selected.