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b.
Retained earnings, December 31, 2017
As originally reported 7,285,000$
Less: prior period adjustment 350,000
As restated 6,935,000$
Net income
2,540,000
d.
The single 2019 $8.00 figure for EPS is unfavorable in comparison with 2018 performance.
Since 2019 has only one EPS figure, it should be compared to the earnings per share from
PROBLEM 12.2A
SLICK SOFTWARE, INC.
For the Year Ended December 31, 2018
Statement of Retained Earnings
SLICK SOFTWARE, INC. (concluded)
35 Minutes, Strong
a.
Net sales 10,800,000$
Costs and expenses:
Cost of goods sold 6,000,000$
Selling expenses 1,104,000
Earnings per share on common stock:
Income from continuing operations
($1,056,000 ÷ 180,000 shares) 5.86$
PROBLEM 12.3A
PHOENIX, INC.
For the Year Ended December 31, 2018
Income Statement
PHOENIX, INC.
b.
Retained earnings, December 31, 2017
As originally reported 2,175,000$
Add: Prior period adjustment (net of income tax) 96,000
As restated 2,271,000$
c.
The “gain on sale of treasury stock” represents the excess of reissue price received over the
cost Phoenix paid to acquire some of its own shares of stock. Although a corporation may
PROBLEM 12.3A
PHOENIX, INC.
For the Year Ended December 31, 2018
Statement of Retained Earnings
PHOENIX, INC. (concluded)
20 Minutes, Easy
Total Number Book Value
Stockholders' of Shares per
Equity Outstanding Share
Beginning balance 840,000$ 40,000 21.00$
Jan. 10 Declared and distributed 5% stock div. 2,000
Balance 840,000$ 42,000 20.00$
Mar. 15
Acquired 2,000 shares of treasury stock
at cost of $21.00 per share (42,000) (2,000)
PROBLEM 12.4A
ALBERS, INC.
20 Minutes, Medium
a. Capital Stock Additional Total
($10 par Paid-in Retained Treasury Stockholders'
value) Capital Earnings Stock Equity
Balances, January 1, 20xx 2,200,000$ 3,530,000$ 1,900,000$ -$ 7,630,000$
Prior period adjustment (net of income tax benefit) (160,000) (160,000)
Issuance of common stock; 10,000 shares @ $68 100,000 580,000 680,000
PROBLEM 12.5A
RIVERTON CORPORATION
RIVERTON CORPORATION
Statement of Stockholders' Equity
For the Year Ended December 31, 20xx
b.
Declaration/distribution of a 5% stock dividend has no effect on total stockholders’ equity.
Declaration of a cash dividend reduces total stockholders’ equity by the amount of the
dividend.
The two types of dividends do not have the same impact upon stockholders’ equity. A cash
PROBLEM 12.5A
RIVERTON CORPORATION (concluded)
40 Minutes, Strong
Jan 3 Dividends 382,000
Dividends Payable 382,000
Apr 12 240,000
240,000
30 19,000
Capital Stock 19,000
Aug 4 22,200
1,800
Cash
Additional Paid-in Capital: Treasury Stock
dividend.
To close Dividends account.
2018
To record declaration of $1 per share cash
PROBLEM 12.6A
a.
General Journal
THOMPSON SERVICE
Treasury Stock
Purchased 6,000 shares of treasury stock at $40
per share.
Stock Dividend to Be Distributed
Cash
Issued 19,000 shares of capital stock as 5% stock
b.
Stockholders’ equity:
Capital stock, $1 par value, 500,000 shares authorized,
401,000 shares issued, of which 1,400 are held in the treasury 401,000$
Additional paid-in capital:
From issuance of capital stock 4,202,000$
From stock dividend 779,000
From treasury stock 14,200 4,995,200
Total paid-in capital 5,396,200
c. Computation of maximum legal cash dividend
per share at Dec. 31, 2018:
Retained earnings at Dec. 31, 2018 3,452,600$
Less: Restriction of retained earnings for
treasury stock owned 56,000
PROBLEM 12.6A
THOMPSON SERVICE
December 31, 2018
Partial Balance Sheet
THOMPSON SERVICE (concluded)
30 Minutes, Strong
Net
(from
Income
Source
NE DNE NE
b. 1.
2.
3.
4.
Payment of a cash dividend has no effect on revenue or expenses, but it reduces cash.
The purchase of treasury stock has no effect on either revenue or expenses and,
Declaration of a cash dividend has no immediate effect upon net income or cash flows.
Reissuance of treasury stock at a price less than its original cost results in a loss, but
these losses are not recorded in the income statement. Instead additional paid-in
1
a.
Net Cash Flow
Current
Assets
Event
PROBLEM 12.7A
Stockholders’
Equity
TECH PROCESS, INC.
50 Minutes, Strong
a.
Stockholders’ equity:
Capital stock:
Common stock, $10 par, 500,000 shares authorized,
150,000 shares issued, of which 10,000 are held
in the treasury 1,500,000$
Stock dividend to be distributed (1) 140,000
(3) Net income for 2017 940,000$
Less: Stock dividend (14,000 shares x $35) 490,000
Retained earnings at end of 2017 450,000$
b.
Stockholders’ equity:
Capital stock:
Common stock, $5 par, 1,000,000 shares authorized,
328,000 shares issued and outstanding (1) 1,640,000$
Additional paid-in capital:
From issuance of common stock 3,000,000$
December 31, 2018
PROBLEM 12.8A
MANDELLA CORPORATION
December 31, 2017
Partial Balance Sheet
MANDELLA CORPORATION
MANDELLA CORPORATION
Partial Balance Sheet
25 Minutes, Strong
a.
(Dollars in
Thousands)
b.
Net loss (18,301)$
Less: Preferred dividend requirements (2,778)
PROBLEM 12.9A
ESPER CORP.
For the Year Ended December 31, Current Year
Partial Income Statement
ESPER CORP.
30 Minutes, Easy
a.
Net sales 61,440,000$
Costs and expenses (including income taxes on continuing
Earnings per share of common stock:
Earnings from continuing operations ($3,576,000 ÷
b.
Estimated net earnings per share next year:
SOLUTIONS TO PROBLEMS SET B
PROBLEM 12.1B
PACIFIC AIRLINES
For the Year Ended December 31, Current Year
Income Statement
PACIFIC AIRLINES
30 Minutes, Medium
a.
Net sales 37,400,000$
Costs and expenses (including applicable income tax) 21,500,000
Earnings per share:
Earnings from continuing operations
[($15,900,000 - $600,000*) ÷ 800,000 shares] 19.13$
PROBLEM 12.2B
BEACH, INC.
For the Year Ended December 31, 2018
Condensed Income Statement
BEACH, INC.
b.
Retained earnings, December 31, 2017
As originally reported 10,700,000$
c.
Total cash dividends declared during 2018 (data given) 2,000,000$
d.
The single 2019 $15.00 figure for EPS is unfavorable in comparison with 2018 performance.
PROBLEM 12.2B
BEACH, INC.
For the Year Ended December 31, 2018
Statement of Retained Earnings
BEACH, INC. (concluded)
35 Minutes, Strong
a.
Net sales 10,200,000$
Costs and expenses:
Cost of goods sold 4,000,000$
Selling expenses 1,050,000
Earnings per share on common stock:
Earnings from continuing operations ($3,688,000 ÷
500,000 shares) 7.38
Loss from discontinued operations ($420,000 ÷
PROBLEM 12.3B
DEXTER, INC.
For the Year Ended December 31, 2018
Income Statement
DEXTER, INC.
b.
Retained earnings, December 31, 2017
As originally reported 3,200,000$
Add: Prior period adjustment (net of income tax) 190,000
c.
The “gain on sale of treasury stock” represents the excess of reissue price received over the
cost Dexter paid to acquire some of its own shares of stock. Although a corporation may
PROBLEM 12.3B
DEXTER, INC.
For the Year Ended December 31, 2018
Statement of Retained Earnings
DEXTER, INC. (concluded)
20 Minutes, Easy
Total Number Book Value
Stockholders' of Shares per
Equity Outstanding Share (rounded)
Beginning balance 1,200,000$ 20,000 60.00$
Jan. 16 Declared and distributed 5% stock div. 1,000
Balance 1,200,000$ 21,000 57.14$
Feb. 9 Acquired 300 shares of treasury stock
PROBLEM 12.4B
SUNSTONE, INC.
