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
Remainder to common stock
$ 0
$ 3,000
$21,000
(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
$320,000 –$20,000
= 25%
$220,000 –$20,000
= 22.2%
EXERCISE 14-16B
2017
2016
Earnings per share
$353,000 –$20,000
150,000
= $2.22
$305,000 –$20,000
180,000
= $1.58
$353,000 –$20,000
$305,000 –$20,000
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
Apr. 15
150,000
150,000
0
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
Cash dividends
250,000
790,000
350,000
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
Dec. 31
215,000
0
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
Balance
200,000
Retained Earnings
Date
Explanation
Ref.
Debit
Credit
Balance
Cash dividends
75,000
128,000
Jan. 1
Aug. 1
Balance
Prior period
adjustment
72,000
500,000
572,000
Cash Dividends
Date
Explanation
Ref.
Debit
Credit
Balance
31
0
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
Dec. 31 Stock Dividend 360,000
Dec. 31 840,000
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
200
200
140
140
dividend
Balance, Dec. 31
$3,600
$1,440
$5,040
PAGE INC.
Stockholders’ Equity Section of Balance Sheet
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock