EXERCISE 14-11
HORNER INC.
Balance Sheet (Partial)
December 31, 20XX
Stockholders’ equity
Paid-in capital
Capital stock
8% Preferred stock, $5 par value,
40,000 shares authorized,
30,000 shares issued ……………… $ 150,000
Common stock, no par, $1 stated
Total capital stock………………. 480,000
Additional paid-in capital
In excess of par—
preferred stock ……………………… 344,000
In excess of stated value—
Retained earnings (see Note R) ……………….. 800,000
Total paid-in capital and
EXERCISE 14-12
(a) NORMAN CORPORATION
Income Statement
For the Year Ended December 31, 2017
____________________________________________________________
Sales revenue ………………………………………………… $700,000
Cost of goods sold …………………………………………. 465,000
Gross profit ……………………………………………………. 235,000
Operating expenses ……………………………………….. 110,000
Income from operations ………………………………….. 125,000
EXERCISE 14-13
(a) PENNINGTON CORPORATION
Income Statement
For the Year Ended December 31, 2017
____________________________________________________________
Net sales ………………………………………………………… $600,000
Cost of goods sold …………………………………………. 360,000
Gross profit ……………………………………………………. 240,000
EXERCISE 14-14
Net income: $2,000,000 – $1,300,000 = $700,000;
$700,000 – (30% X $700,000) = $490,000
Preferred dividends: (50,000 X $20) X 6% = $60,000
EXERCISE 14-15
2017
2016
Earnings per share
$290,000– $20,000
100,000
= $2.70
$200,000– $20,000
80,000
= $2.25
$290,000– $20,000
$200,000– $20,000
EXERCISE 14-16
2017
2016
Earnings per share
$200,000– $20,000
150,000
= $1.20
$191,000– $20,000
180,000
= $0.95
= 10.0%
= 9.0%
EXERCISE 14-17
(a)
$241,000– $16,000
100,000
= $2.25
SOLUTIONS TO PROBLEMS
PROBLEM 14-1A
(a) Feb. 1 Cash Dividends (60,000 X $1) …………… 60,000
Dividends Payable ……………………. 60,000
Mar. 1 Dividends Payable …………………………... 60,000
Cash ………………………………………… 60,000
July 1 Stock Dividends (12,000 X $13) ………… 156,000
Common Stock Dividends
Distributable (12,000 X $10) …… 120,000
Paid-in Capital in Excess of
Par—Common Stock
(12,000 X $3) …………………………. 36,000
31 Common Stock Dividends
Distributable ……………………………….. 120,000
Common Stock ………………………… 120,000
PROBLEM 14-1A (Continued)
(b)
Common Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Apr. 1
Jan. 1
Balance
1,200,000
Common Stock Dividends Distributable
Date
Explanation
Ref.
Debit
Credit
Balance
July 1
120,000
120,000
Paid-in Capital in Excess of Par—Common Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Balance
200,000
Retained Earnings
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Dec. 31
Balance
Net income
350,000
600,000
950,000
Cash Dividends
Date
Explanation
Ref.
Debit
Credit
Balance
Feb. 1
60,000
60,000
Stock Dividends
Date
Explanation
Ref.
Debit
Credit
Balance
PROBLEM 14-1A (Continued)
(c) GEFFREY CORPORATION
Balance Sheet (Partial)
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
Common stock, $10 par value, 132,000
PROBLEM 14-2A
(a) July 1 Cash Dividends
[($800,000 ÷ $5) X $.60] ………………… 96,000
Dividends Payable …………………… 96,000
Aug. 1 Retained Earnings ………………………….. 25,000
Accumulated Depreciation ……….. 25,000
15 Cash Dividends
[12,000 X ($50 X 6%)] …………………… 36,000
Dividends Payable …………………… 36,000
(b)
Preferred Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Balance
600,000
PROBLEM 14-2A (Continued)
Common Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Balance
Common Stock Dividends Distributable
Date
Explanation
Ref.
Debit
Credit
Balance
Dec. 1
120,000
120,000
Paid-in Capital in Excess of Par—Preferred Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Balance
200,000
Paid-in Capital in Excess of Par—Common Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Retained Earnings
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Aug. 1
Balance
Prior period
adjustment—
depreciation
800,000
PROBLEM 14-2A (Continued)
Cash Dividends
Date
Explanation
Ref.
Debit
Credit
Balance
July 1
96,000
96,000
Stock Dividends
Date
Explanation
Ref.
Debit
Credit
Balance
(c) KARP COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2017
Balance, January 1, as reported ……………….. $ 800,000
Correction of 2016 depreciation expense ….. (25,000)
PROBLEM 14-2A (Continued)
(d) KARP COMPANY
Balance Sheet (Partial)
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
6% Preferred stock, $50 par
value, 12,000 shares issued … $ 600,000
Additional paid-in capital
In excess of par—
preferred stock …………………… 200,000
In excess of par—
common stock……………………. 612,000
Total additional paid-in
PROBLEM 14-3A
(a)
Retained Earnings
Dec. 31 Balance 1,042,000
Sept. 1 Prior Per. Adj. 63,000
Jan. 1 Balance 1,170,000
(b) STOREY CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2017
Balance, January 1, as reported ……………… $1,170,000
Correction of overstatement of 2016 net
income because of understatement of
(c) STOREY CORPORATION
Partial Balance Sheet
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
6% Preferred stock,
PROBLEM 14-3A (Continued)
STOREY CORPORATION (Continued)
Common stock, $10 par value,
500,000 shares authorized,
250,000 shares issued and
outstanding ……………………… $2,500,000
Common stock dividends
distributable …………………….. 250,000 2,750,000
Note X: Retained earnings is restricted for plant expansion, $200,000.
(d) Total cash dividend ………………………………… $250,000
Allocated to preferred stock
PROBLEM 14-4A
(a) VEN CORPORATION
Partial Balance Sheet
March 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
Common stock, no-par value,
(b) VEN CORPORATION
Partial Balance Sheet
June 30, 2017
Stockholders’ equity
Paid-in capital
Capital stock
Common stock, no-par value,
(c) VEN CORPORATION
Partial Balance Sheet
September 30, 2017
Stockholders’ equity
Paid-in capital
Capital stock
Common stock, no-par value,