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Exercise 18–7
Requirement 1 ($ in millions)
Cash ($424 million – 2 million) ................................................... 422
Paid-in capital—excess of par (difference) ........................... 407
Requirement 2
In recording the sale of shares above, the cost of services related to the sale
reduced the net proceeds from selling the shares. Since paid-in capital—excess of par
is credited for the excess of the proceeds over the par amount of the shares sold, the
effect of share issue costs is to reduce the amount credited to that account. On the
other hand, the costs associated with a debt issue are recorded in a separate “debt issue
Exercise 18–8
Requirement 1
The base amount of the preferred shares is $2,500,000 ÷ 100,000 shares = $25. The
Requirement 2
If dividends are not paid in 2017 and 2018, but are paid in 2019, the shareholder will
receive $169.625 x 3 = $508.875. The prior years’ unpaid dividends are paid because
Requirement 3
If the investor chooses to convert the shares in 2017, the investor will receive $25 ÷
Requirement 4
If Ozark chooses to redeem the shares on June 18, 2017, the investor will be paid
$2,744 for his/her 100 shares:
Exercise 18–9
AMTC
Cash (7.5 million shares x $13.546) ..................... 101,595,000
18–24 Intermediate Accounting, 8/e
Exercise 18–10
Preferred Common
2016 $ 8 million $ 0
Exercise 18–11
1. January 7, 2016
($ in millions)
Common stock (2 million shares x $1 par) .................................. 2
2. August 23, 2016
Common stock (4 million shares x $1 par) .................................. 4
3. July 25, 2017
Cash (3 million shares x $6 per share) ........................................... 18
Exercise 18–12
1. January 2, 2016 ($ in millions)
Common stock (10 million shares x $1 par) ................................ 10
2. March 3, 2016
Common stock (10 million shares x $1) ..................................... 10
3. August 13, 2016
Cash (1 million shares x $42) ...................................................... 42
4. December 15, 2016
Cash (2 million shares x $36) ...................................................... 72
Exercise 18–13
1. January 23, 2016 ($ in millions)
Treasury stock (10 million shares x $20) ..................................... 200
Cash .................................................................................... 200
2. September 3, 2016
Cash (1 million shares x $21) ...................................................... 21
3. November 4, 2016
Cash (1 million shares x $18) ...................................................... 18
18–28 Intermediate Accounting, 8/e
Exercise 18–14
1. February 12, 2016
($ in millions)
Treasury stock (1 million shares x $13) ...................................... 13
Cash .................................................................................... 13
2. June 9, 2017
3. May 25, 2018
Cash (2 million shares x $15) ...................................................... 30
Paid-in capital—share repurchase (difference) .................... 8
4. May 25, 2018
Cash (2 million shares x $15) ...................................................... 30
Exercise 18–15
Requirement 1
Method A – Reacquired shares are treated as treasury stock.
authorized but unissued shares.
Requirement 2
Reacquired shares that are retired have their status restored to that of authorized
but unissued shares. Although theoretically identical to retired shares, treasury
Exercise 18–16
This is a change in accounting principle.
($ in millions)
Common stock ($1 par x 4 million shares retired) ....................... 4
UMC applies the new way of reporting reacquired shares retrospectively; that is,
to all prior periods as if it always had used that method. In other words, all financial
statement amounts for individual periods affected by the change and that are included
Exercise 18–17
Requirement 1
($ in millions)
Treasury stock 1,792
Requirement 2
($ in millions)
Common stock (112 million shares x $.01) 1.12
Requirement 3
Ford is referring to the fact that stock options and stock awards increase the
18–32 Intermediate Accounting, 8/e
Exercise 18–18
Requirement 1
Retirement of common shares ($ in millions)
Common stock (5 million shares x $1 par per share)..................... 5
Net income closed to retained earnings
Income summary ............................................................................. 88
Retained earnings (given) .................................................... 88
Declaration of a cash dividend
Requirement 2
BRENNER-JUDE CORPORATION
Statement of Retained Earnings
FOR THE YEAR ENDED DECEMBER 31, 2016
($ in millions)
Balance at January 1 $ 90
Net income for the year 88
Exercise 18–19
April 1, 2016
Retained earnings (300,000* shares at $30 per share) ................ 9,000,000
April 1, 2016
Retained earnings ....................................................................... 9,000,000
June 1, 2016
Common stock dividends distributable .................................. 300,000
Exercise 18–20
Requirement 1
Paid-in capital—excess of par** 24,500
Requirement 2
If the per share par value of the shares is not to be changed, the stock distribution
Requirement 3
If Hanmi’s stock price had been $36 at the time of the split, its approximate value
Exercise 18–21
Requirement 1
A stock dividend or stock split usually results in some shareholders being entitled
to fractions of whole shares. For instance, if a company declares a 25% stock
Requirement 2
($ in millions)
Retained earnings (36 million* x $21 per share) .............................. 756
Exercise 18–22
The FASB Accounting Standards Codification represents the single source of
authoritative U.S. generally accepted accounting principles. The specific citation for
each of the following items is:
1. Disclosure for the pertinent rights and privileges of the various securities
outstanding:
2. Requirement to record a “small” stock dividend at the fair value of the
shares issued:
FASB ASC 505–20–30–3: “Equity–Stock Dividends and Stock Splits–Initial
3. Requirement to exclude from the determination of net income gains and
losses on transactions in a company’s own stock:
Exercise 18–23
Requirement 1
a. March 3—declaration date
Investment in Leasco International stock ......................... 20,000
Gain on appreciation of investment ($720,000 – 700,000) 20,000
b. May 3
Paid-in capital—excess of par, common* ......................... 90,000
c. July 5
Retained earnings (9,000* x $11 per share) ................................ 99,000
18–38 Intermediate Accounting, 8/e
Exercise 18–23 (concluded)
d. December 1—declaration date
Retained earnings .............................................................. 7,920
Cash dividends payable ($90,000 par x 8.8%) ................. 7,920
e. December 1—declaration date
Retained earnings .............................................................. 229,500
Cash dividends payable (459,000* x $.50) ...................... 229,500
Cash .............................................................................. 229,500
Requirement 2
CONSOLIDATED PAPER, INC.
[Shareholders’ Equity section]
December 31, 2016
Paid-in capital:
Preferred stock, 8.8%, 90,000 shares at $1 par $ 90,000
Exercise 18–24
The return on shareholders' equity is computed by dividing net income by average
shareholders' equity.
18–40 Intermediate Accounting, 8/e
Exercise 18–25
Indicate by letter whether each of the terms or phrases listed below is more associated
with financial statements prepared in accordance with U.S. GAAP (U) or International
Financial Reporting Standards (I).
Terms and phrases
U 1. Common stock
I 2. Preference shares
