( 400 × ) +
Chapter 11, E 19.
$2,400
Preferred Stock
Book Value per Share =$105
400 Shares
*
538
Sept. 1 500,000 Sept. 1 32,000 Sept. 1 100,000
Sept. 1 400,000 Nov. 30 48,000
Sept. 1 32,000 Nov. 30 48,000
1. T accounts set up and transactions recorded in the accounts
Additional Paid-In Capital
Common Stock
Start-up and Organization Costs
Cash
Dividends Payable
Chapter 11, P 1.
Dividends
*
539
* $80,000 – $48,000 =
Dewey Corporation
Contributed capital
Common stock, $8 par value, 300,000 shares
authorized, 130,000 shares issued and
Balance Sheet
Stockholders’ Equity
November 30, 2011
Chapter 11, P 1. (Continued)
2. Stockholders’ equity section of the balance sheet prepared
$32,000
The cash dividend declaration on November 30 will not affect net income and will
3. User Insight: Effects of cash dividend declaration discussed
540
Per Per Dividends
Share Share Allocated
$ 3.50 —$ 35,000
Per Per Dividends
Share Share Allocated
Dividends Yield Dividends per Share
Market Price per Share
Dividends
Dividends
Amount
Common Stock
=
Noncumulative
Chapter 11, P 2.
Dividends
Dividends
Preferred Stock
Total
Amount
$ 35,000
2012
Amount
Common Stock
—
Total
Amount
Preferred Stock
1. Dividends calculated for cumulative preferred stock and common stock
2. Dividends calculated for noncumulative preferred stock and common stock
3. The 2012 and 2013 dividends yield for common stock calculated
Cumulative
2011
541
Chapter 11, P 2. (Continued)
4. User Insight: Preferred stock compared to long-term bonds
Both cumulative and noncumulative preferred stock have a fixed level of dividends
and are thus similar in this way to long-term bonds, which have a fixed level of in-
terest. However, cumulative preferred stock would be more similar to long-term
Jan. 19 310 $ 15,000
$ 31,500 312 16,500
Aug. 1 350 7,500
10,000 313 2,500
Sept. 1 7,125 220 7,125
15
25 7,125 110 7,125
Oct. 30 310 4,000
Credited
Account
Number
Debited
Dollar
Amount
Dollar
Amount
Account
Account
Number
no entry
Chapter 11, P 3.
1. Account numbers and dollar amounts provided
110
220
no entry
110
341
*
2. User Insight: Stockholders’ equity section of balance sheet discussed
The stockholders’ equity section of the balance sheet is an important factor in ana-
Chapter 11, P 3. (Continued)
Aug. 3 110,000 Oct. 10 Aug. 3 100,000
Aug
.
3 Aug. 22 250,000
Bal. 250,000
Oct. 4
Bal.
10,000
Preferred Stock
Cash
3,250
15
Additional Paid-In Capital
Common Stock
Chapter 11, P 4.
1. T accounts set up and transactions recorded in the accounts
Land
5,000
23,000
8,000
Treasury Stock, Common
545
165,000 188,000
$438,000
6,725
2. Stockholders’ equity section of the balance sheet prepared
Balance Sheet
October 31, 2011
Stas Corporation
Retained earnings*
Total contributed capital
Chapter 11, P 4. (Continued)
Additional paid-in capital
Stockholders’ Equity
Contributed capital
Preferred stock, $100 par value, 6 percent, 5,000 shares
546
* ++=
$1.97
Earnings per Share
12.7
Times
Market Price per Share
Price/Earnings
(P/E) Ratio =
Chapter 11, P 4. (Continued)
3. User Insight: Performance ratios computed for the quarter
=$25.00 =
Stas Corporation’s dividends yield is only 0.4 percent, which means that investors
$48,000$110,000
$250,000
4. User Insight: Investors’ return discussed
$408,000
3/25 12,000
12/15 25,200
Bal. 25,200
1
2
240,000
Common Stock
252,000
310,800
226,800
84,000
1. Transactions recorded in T accounts
Common Stock Distributable
Bal.
Stock Dividends
Bal.
Bal.
12/15
3/25
5/1
12,000
Chapter 11, P 5.
5/1 12,000
548
3. User insight: Effect of stock transactions determined
Chapter 11, P 5. (Continued)
If you owned 2,000 shares of Rigby Storage stock on March 1, 2012, you would own
6,930 shares on February 15, 2013 (calculation below).
2. Stockholders’ equity section of the balance sheet prepared
Rigby Storage, Inc.
Stockholders’ Equity
December 31, 2012
Contributed capital
Common stock, $1 par value, 1,000,000 shares authorized,
549
1 Mar. 2 Mar. 1 60,000 1
15 May 31 3,800
Bal. 3,800
Dividends Payable
Chapter 11, P 6.
Common Stock
1. Transactions recorded in T accounts
Cash
Mar. 12,000
25,000
25,000
100,000
Apr.
Dividends
Bal.
Treasury Stock, Common
550
$ 86,000
Contributed capital
Common stock, $4 par value, 50,000 shares authorized,
21,500 shares issued and 19,000 shares outstanding
Algae Corporation
Balance Sheet
May 31, 2011
2. Stockholders’ equity section of balance sheet prepared
Stockholders’ Equity
Chapter 11, P 6. (Continued)
3. User Insight: Effects of cash dividend declaration discussed
The cash dividend declaration on May 31 will not affect net income and will not
551
Per Per Dividends
Amount Share Amount Share Allocated
$ 30,000 $ 6.00 — — $ 30,000
Per Per Dividends
Amount Share Amount Share Allocated
$ 30,000 $ 6.00 — —$ 30,000
1. Dividends calculated for cumulative preferred stock and common stock
2. Dividends calculated for noncumulative preferred stock and common stock
Total
Noncumulative
Common Stock
Dividends
Preferred Stock
Chapter 11, P 7.
Dividends Total
2010
2011
Dividends
Preferred Stock Common Stock
Cumulative
2010
Dividends
552
Chapter 11, P 7. (Continued)
4.
3. The 2012 and 2013 dividends yield for common stock calculated
Both cumulative and noncumulative preferred stock have a fixed level of dividends
and are thus similar in this way to long-term bonds, which have a fixed level of in-
terest. However, cumulative preferred stock would be more similar to long-term
User Insight: Preferred stock compared to long-term bonds
=
Dividends per Share
Market Price per Share
Dividends Yield
1 110,000
50,000
60,000
2 100,000
100,000
10 30,000
12,500
2 19,500
19,500
per share
10 980
12
22 980
980
Cash
No entry required
$13
Dividends Payable
Aug. Treasury Stock, Common
preferred stock at par
Common Stock
Cash
Common Stock
Land
$100
Dividends
July
1.
Chapter 11, P 8.
Journal entries prepared
Additional Paid-In Capital
stock for the treasury at
Cash
Cash
Preferred Stock
Purchased 1,500 shares of common
par valueIssued 1,000 shares of
554