2. The broker is not correct. Corporations are not legally liable to pay dividends until the
3. The company may not have had enough cash on hand to pay a dividend on the common
CHAPTER 13
CORPORATIONS: ORGANIZATION, STOCK
DISCUSSION QUESTIONS
TRANSACTIONS, AND DIVIDENDS
13-1
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
PE 13–1A
Amount distributed………………………………
…
$30,000 $90,000 $125,000
…
PE 13–1B
Amount distributed………………………………
…
$21,600 $4,000 $100,800
…
…
PE 13–2A
May 10 Cash (90,000 shares × $42)
Common Stock (90,000 shares × $30)
PRACTICE EXERCISES
Year 1 Year 2 Year 3
Year 1 Year 2 Year 3
2,700,000
3,780,000
13-2
…
PE 13–2B
Jan. 22 Cash 720,000
Common Stock (180,000 shares × $4) 720,000
PE 13–3A
Aug. 1 Cash Dividends 1,250,000
PE 13–3B
Feb. 1 Cash Dividends 480,000
13-3
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
PE 13–4A
Feb. 15 Stock Dividends (250,000 shares × 2% × $52) 260,000
PE 13–4B
June 8 Stock Dividends (820,000 shares × 5% × $63) 2,583,000
PE 13–5A
Jan. 31 Treasury Stock (22,500 shares × $31) 697,500
Cash 697,500
13-4
PE 13–5B
May 27 Treasury Stock (75,000 shares × $8) 600,000
Cash 600,000
PE 13–6A
Paid-in capital:
Common stock, $60 par (250,000 shares
authorized, 200,000 shares issued) $12,000,000
PE 13–6B
Paid-in capital:
Common stock, $120 par (500,000 shares
authorized, 400,000 shares issued) $48,000,000
Stockholders’ Equity
Stockholders’ Equity
13-5
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
PE 13–7A
Retained earnings, July 1, 2013 $3,900,000
PE 13–7B
Retained earnings, November 1, 2013 $12,400,000
ROCKWELL INC.
Retained Earnings Statement
For the Year Ended June 30, 2014
NORIC CRUISES INC.
Retained Earnings Statement
For the Year Ended October 31, 2014
13-6
PE 13–8A
PE 13–8B
a. 2014: Earnings per Share = Net Income – Preferred Dividends
Avg. Number of Common Shares Outstanding
2014: Earnings per Sharea. Avg. Number of Common Shares Outstanding
Net Income – Preferred Dividends
=
13-7
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–1
a. Total dividend declared…………
…
$24,000 $81,000 $92,000 $139,000
Ex. 13–2
a. Total dividend declared…………
…
$36,000 $58,000 $75,000 $124,000
…
EXERCISES
2nd Year 3rd Year 4th Year1st Year
1st Year 2nd Year 3rd Year 4th Year
13-8
…
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–3
a. Feb. 25 Cash (120,000 shares × $40) 4,800,000
Common Stock (120,000 shares × $36) 4,320,000
Ex. 13–4
a. Aug. 5 Cash (500,000 shares × $3) 1,500,000
Common Stock (500,000 shares × $1) 500,000
Ex. 13–5
May 10 Land (3,600 shares × $28) 100,800
13-9
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–6
a. Cash 900,000
Common Stock (45,000 shares × $20) 900,000
13-10
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–8
1 Cash 4,500,000
Feb.
13-11
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–9
10 Cash Dividends 187,500
Ex. 13–10
a. (1) Stock Dividends [(300,000 shares × 5%) × $40] 600,000
b. (1) $6,900,000 ($5,400,000 + $1,500,000)
July
13-12
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–11
a. 4 Treasury Stock (33,000 shares × $84) 2,772,000
Cash 2,772,000
Ex. 13–12
a. 17 Treasury Stock (50,000 shares × $12) 600,000
Cash 600,000
Mar.
Feb.
13-13
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–13
a. 14 Treasury Stock (23,500 shares × $75) 1,762,500
Cash 1,762,500
May
13-14
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–14
Paid-in capital:
Preferred 2% stock, $120 par
(85,000 shares authorized,
Ex. 13–15
Paid-in capital:
Common stock, $45 par
(80,000 shares authorized,
Stockholders’ Equity
Stockholders’ Equity
13-15
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–16
Paid-in capital:
Preferred 1% stock, $150 par
(50,000 shares authorized,
48,000 shares issued) $ 7,200,000
Ex. 13–17
Stockholders’ Equity
ATLAS PUMPS CORPORATION
Retained Earnings Statement
For the Year Ended January 31, 2014
13-16
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–18
One possible corrected Stockholders’ Equity section of the balance sheet using Method 1
of Exhibit 4 is as follows:
Paid-in capital:
Preferred 2% stock, $80 par (125,000
shares authorized and issued) $10,000,000
Stockholders’ Equity
13-17
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–19
Paid-In
Common Capital
Stock, in Excess Treasury Retained
$40 par of Par Stock Earnings
Balance, Jan. 1, 2014 $4,800,000 $ 960,000 —$11,375,000
Ex. 13–20
Ex. 13–21
Assets Liabilities
(2) Declaring a stock dividend 0 0
in (2) 0 0
(4) Declaring a cash dividend 0 +
0
0
–
Stockholders’
Equity
$17,135,000
I-CARDS INC.
Statement of Stockholders’ Equity
For the Year Ended December 31, 2014
Total
13-18
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–22
Jan. 8 No entry required. The stockholders’ ledger would be revised to
record the increased number of shares held by each stockholder.
Apr. 30 Cash Dividends {[(18,000 shares × $0.75) + 55,500
(150,000 shares × $0.28)] = $13,500 + $42,000 = $55,500}
Ex. 13–23
Earnings per Share = Net Income – Preferred Dividends
Avg. Number of Common Shares Outstanding
13-19
CHAPTER 13 Corporations: Organization, Stock Transactions, and Dividends
Ex. 13–24
b. Year 3 Year 2 Year 1
Earnings per share………………………………………… $2.86 $3.24 $3.64
a. Net Income – Preferred Dividends
Avg. Number of Common Shares Outstanding
=Earnings per Share
13-20