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CHAPTER 14
SOLUTIONS TO EXERCISES—SET B
EXERCISE 14-1B
(a) June 15 Cash Dividends (150,000 X $1) ............ 150,000
Dividends Payable ........................ 150,000
July 10 Dividends Payable ................................ 150,000
Cash ............................................... 150,000
EXERCISE 14-2B
(a)
2016
2017
2018
Total dividend declaration
Allocation to preferred stock
Remainder to common stock
$5,000
(5,000)
$ 0
$12,000
(6,000)
$ 6,000
$28,000
(6,000)
$22,000
(c) Dec. 31 Cash Dividends........................................ 28,000
Dividends Payable ........................... 28,000
EXERCISE 14-3B
(a) Stock Dividends (24,000* X $18) ............................ 432,000
Common Stock Dividends Distributable
(24,000 X $10) .............................................. 240,000
Paid-in Capital in Excess of Par—
(b) Stock Dividends (42,000* X $20) ............................ 840,000
Common Stock Dividends Distributable
(42,000 X $5) ................................................ 210,000
EXERCISE 14-4B
Before
Action
After
Stock
Dividend
After
Stock
Split
Stockholders’ equity
Paid-in capital
Common stock
In excess of par
$ 500,000
0
$ 525,000
10,000
$ 500,000
0
EXERCISE 14-5B
(a) (1) Par value before the stock dividend was $10.
(b) Common stock
Balance before dividend ................................................. $400,000
Dividend shares (4,000 X $10) ........................................ 40,000
New balance ............................................................. $440,000
EXERCISE 14-6B
Paid-in Capital
Item
Capital Stock
Additional
Retained Earnings
1.
2.
NE
I
NE
D
D
NE
EXERCISE 14-7B
1. Dec. 31 Retained Earnings .......................... 50,000
Interest Expense ..................... 50,000
EXERCISE 14-8B
ZUNIGA CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2017
Balance, January 1, as reported .............................. $550,000
Correction for overstatement of 2013 net
EXERCISE 14-9B
OSWALD COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2017
Balance, January 1, as reported .................................. $310,000
Correction for understatement of 2012 net income ....... 10,000
Balance, January 1, as adjusted ................................. 320,000
EXERCISE 14-10B
VASQUEZ COMPANY
Balance Sheet (Partial)
December 31, 2017
Paid-in capital
Capital stock
Preferred stock ................................................. $125,000
Common stock ................................................. 400,000
Total capital stock ...................................... $525,000
EXERCISE 14-11B
RAMIREZ 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
value, 400,000 shares autho-
rized, 300,000 shares issued
and 290,000 outstanding ............ $ 300,000
Retained earnings (see Note R) .................... 850,000
Total paid-in capital and
retained earnings ................ 2,894,000
EXERCISE 14-12B
(a) ENOS CORPORATION
Income Statement
For the Year Ended December 31, 2017
_______________________________________________________________
Sales revenue ................................................................ $800,000
Cost of goods sold ........................................................ 495,000
Gross profit ................................................................... 305,000
Operating expenses ...................................................... 110,000
EXERCISE 14-13B
(a) MARKOWITZ CORPORATION
Income Statement
For the Year Ended December 31, 2017
_______________________________________________________________
Net sales ........................................................................ $600,000
Cost of goods sold ........................................................ 390,000
Gross profit ................................................................... 210,000
(b)
Net income – preferred dividends
=
$41,650 – $15,000
=
13.3%
Average common stockholders’ equity
$200,000
EXERCISE 14-14B
Net income: $2,000,000 – $1,400,000 = $600,000;
$600,000 – (30% X $600,000) = $420,000
EXERCISE 14-15B
2017
2016
Earnings per share
$320,000 –$20,000
100,000
= $3.00
$220,000 –$20,000
80,000
= $2.50
EXERCISE 14-16B
2017
2016
Earnings per share
$353,000 –$20,000
150,000
= $2.22
$305,000 –$20,000
180,000
= $1.58
EXERCISE 14-17B
(a)
$286,000 –$16,000
100,000
= $2.70
SOLUTIONS TO PROBLEMS—SET C
PROBLEM 14-1C
(a) Jan. 15 Cash Dividends (100,000 X $1) ............. 100,000
Dividends Payable ......................... 100,000
May 15 Common Stock Dividends
Distributable ...................................... 150,000
Common Stock (15,000 X $10) ...... 150,000
31 Income Summary ................................... 250,000
Retained Earnings ......................... 250,000
Retained Earnings ................................. 215,000
Cash Dividends .............................. 215,000
PROBLEM 14-1C (Continued)
(b)
Common Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
May 15
July 1
Balance
2 for 1 stock split—
new par value = $5
150,000
1,000,000
1,150,000
Paid-in Capital in Excess of Par—Common Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Apr. 15
Balance
75,000
200,000
275,000
Retained Earnings
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Balance
540,000
Cash Dividends
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 15
Dec. 1
100,000
115,000
100,000
215,000
PROBLEM 14-1C (Continued)
Stock Dividends
Date
Explanation
Ref.
Debit
Credit
Balance
Apr. 15
225,000
225,000
(c) GLADOW CORPORATION
Balance Sheet (Partial)
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
Common stock, $5 par value, 230,000
shares issued and outstanding............... $1,150,000
PROBLEM 14-2C
(a) July 1 Cash Dividends
[($800,000 ÷ $10) X $.50] ................... 40,000
Dividends Payable ........................ 40,000
Aug. 1 Accumulated Depreciation .................. 72,000
Retained Earnings ........................ 72,000
15 Cash Dividends (5,000 X $7) ................ 35,000
Dividends Payable ........................ 35,000
(b)
Preferred Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Balance
500,000
PROBLEM 14-2C (Continued)
Common Stock Dividends Distributable
Date
Explanation
Ref.
Debit
Credit
Balance
Dec. 1
80,000
80,000
Paid-in Capital in Excess of Par—Preferred Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Balance
100,000
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
72,000
500,000
572,000
Cash Dividends
Date
Explanation
Ref.
Debit
Credit
Balance
July 1
40,000
40,000
Stock Dividends
Date
Explanation
Ref.
Debit
Credit
Balance
Dec. 1
31
128,000
128,000
128,000
0
PROBLEM 14-2C (Continued)
(c) COREA, INC.
Retained Earnings Statement
For the Year Ended December 31, 2017
Balance, January 1, as reported ...................... $500,000
Correction of 2013 depreciation ...................... 72,000
Balance, January 1, as adjusted ...................... 572,000
(d) COREA, INC.
Balance Sheet (Partial)
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
7% Preferred stock, $100 par
value, 5,000 shares issued ....... $ 500,000
Common stock, $10 par value,
80,000 shares issued ................ $800,000
Common stock dividends
common stock ........................... 248,000
Total additional paid-in
capital .................................. 348,000
Total paid-in capital................ 1,728,000
Retained earnings....................................... 719,000
Total stockholders’ equity ..... $2,447,000
PROBLEM 14-3C
(a)
Retained Earnings
Nov. 1 Cash Dividend 600,000
Jan. 1 Balance 2,450,000
(b) MERANDO CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2017
Balance, January 1 ......................................... $2,450,000
Add: Net income ........................................... 840,000
3,290,000
(c) MERANDO CORPORATION
Partial Balance Sheet
December 31, 2017
____________________________________________________________
Stockholders’ equity
Paid-in capital
Capital stock
6% Preferred stock, $100
par value, noncumulative,
callable at $125, 20,000
shares authorized, 10,000
PROBLEM 14-3C (Continued)
MERANDO CORPORATION (Continued)
Additional paid-in capital
In excess of par—
preferred stock ...................... $ 200,000
Retained earnings (see Note A) ............. 2,330,000
Total stockholders’
(d) Total dividend ........................................................................ $600,000
Allocated to preferred stock—current year only ................. 60,000
Remainder to common stock ................................................ $540,000
PROBLEM 14-4C
(a) TOWERS CORPORATION
Partial Balance Sheet
March 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
(b) TOWERS CORPORATION
Partial Balance Sheet
June 30, 2017
Stockholders’ equity
Paid-in capital
Capital stock
(c) TOWERS CORPORATION
Partial Balance Sheet
September 30, 2017
Stockholders’ equity
Paid-in capital
Capital stock
PROBLEM 14-4C (Continued)
(d) TOWERS CORPORATION
Partial Balance Sheet
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
PROBLEM 14-5C
Preliminary analysis (in thousands)—NOT REQUIRED
Common
Stock
Common Stock
Dividends
Distributable
Retained
Earnings
Total
Balance, Jan. 1
$3,000
$400
$1,200
$4,600
1. Issued 100,000
shares for stock
dividend
400
(400)
0
PAGE INC.
Stockholders’ Equity Section of Balance Sheet
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
