19
Corporations:
Stock Values, Dividends,
Treasury Stocks, and
Retained Earnings
ANSWERS TO DISCUSSION QUESTIONS AND
CRITICAL THINKING/ETHICAL CASE
1. Market value represents the price of stock that is bought and sold in the open
3. The date of record has no effect on the accounts. The date of record identifies the
names of the stockholders who currently hold stock and will receive the dividend.
4. A company may declare a stock dividend
A. Because it has insufficient cash.
5. Because the amount of Retained Earnings(Dividends) is transferred to Common
Stock and Paid-in Capital in Excess of Par Value–Stock Dividend. All of the
7. A stock split does not affect the accounts other than to increase the number of
shares issued and outstanding and decrease the par value per share. With a stock
8. Reject. Treasury Stock is a contra-stockholders’ equity account.
10. The account Paid-In Capital from Treasury Stock represents the difference between
11. Disagree. Appropriations of retained earnings can be voluntary or contractual.
13. Beginning Retained Earnings
+/- Prior Period Adjustments
14. The question in this case is whether Alan should disclose confidential information
SOLUTIONS TO CONCEPT CHECKS
1.
(Redemption value
+ Dividends in arrears)
/ Preferred shares
= Book value
2.
March 20 Retained Earnings
24,000
April 28
Dividends Payable
24,000
3.
Aug.
Common Stock Dividend Distributable
10,530
Jul.
Retained Earnings
19,305
4.
a. Treasury Stock-Common
1,760
Cash
1,760
b. Cash
567
5.
Retained Earnings (Prior Period Adjustment)
16,000
Accumulated Depreciation
16,000
SOLUTIONS TO SET A EXERCISES
19A-1
(Redemption value
+ Dividends in
arrears)
/ Preferred shares
outstanding
= Book value
Preferred
($ 91,000
+ $ 14,000)
= $18.00
19A–2.
June
9
Retained Earnings
156
0
0
0
00
19A–3.
Aug. 5
Retained Earnings
103,250
Common Stock Dividend Distributable
19A-4.
April 3
Cash
56,400
Common Stock
32,900
23,500
April 9
Treasury Stock – Common
1,182
Cash
Cash
EXERCISES (CONTINUED)
19A–5. QUINCY COMPANY
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 2019
Retained earnings, Jan. 1, 2019
$44
0
0
0
00
Less: Correction of 2017 error
9
0
0
0
00
Add: Net Income for 2019
0
0
0
00
Less: Dividends declared in 2019
0
0
0
00
SOLUTIONS TO SET B EXERCISES
19B–1.
(Redemption value
+ Dividends in
/ Preferred shares
= Book value
19B-2.
June
9
Retained Earnings
144
0
0
0
00
19B-3.
Aug. 5
Retained Earnings
95,040
Common Stock Dividend Distributable
19B-4.
April 3
Cash
57,200
Common Stock
15,600
Paid-in Capital in Excess of Par Value – Common
41,600
Treasury Stock – Common
Cash
Cash
Paid-in Capital from Treasury Stock
EXERCISES (CONTINUED)
19B–5.
JOHNSON COMPANY
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 2019
Retained earnings, Jan. 1, 2019
$35
0
0
0
00
Less: Correction of 2017 error
18
0
0
0
00
Add: Net Income for 2019
58
0
0
0
00
Less: Dividends declared in 2019
15
0
0
0
00
SOLUTIONS TO SET A PROBLEMS
PROBLEM 19A-1
a.
(Redemption value
+ Dividends in arrears)
/ Preferred shares
outstanding
= Book value
Preferred
($ 457,600
+ $ 0)
/ 4,400
= $104.00
/ Common shares
outstanding
= Book value
($ 982,600
/ 5,600
(Redemption value
+ Dividends in arrears)
/ Preferred shares
outstanding
= Book value
Preferred
($ 457,600
+ $ 86,240)
/ 4,400
= $123.60
.
PROBLEM 19A-2 RACETTE CORPORATION
GENERAL JOURNAL PAGE 4
Date
201X
Account Titles and Description
PR
Dr.
Cr.
July
2
Retained Earnings
300
0
0
0
00
0
0
0
1
Dividends Payable
0
0
0
0
0
0
4
Retained Earnings
0
0
0
0
0
0
0
0
0
Sept.
Common Stock Dividend Distributable
0
0
0
Common Stock
0
0
0
1
Retained Earnings
0
0
0
8
0
0
2
Common Stock Dividend Distributable
2
0
0
2
0
0
PROBLEM 19A-3
(1) COUNTRY VIEW CORPORATION
GENERAL JOURNAL PAGE 3
201X
Account Titles and Description
PR
Dr.
Cr.
June
4
Treasury Stock
21
5
6
0
00
Cash
21
5
6
0
00
4
6
0
Dividends Payable
4
6
0
00
4
6
0
Cash
4
6
0
00
Sept.
9
4
0
0
Treasury Stock
1
6
0
00
Paid-in Capital from Treasury Stock
2
4
0
00
7
0
0
7
0
0
Treasury Stock
15
4
0
0
00
7
0
0
Common Stock Dividend Distributable
25
0
2
0
00
Paid-in Capital in Excess of Par Value-
16
6
8
0
00
0
0
0
Retained Earnings
62
0
0
0
00
PROBLEM 19A-3 (CONTINUED)
(2)
COUNTRY VIEW CORPORATION
STOCKHOLDERS’ EQUITY
Paid-in Capital:
Common Stock, $18 par value, authorized
2
Common Stock Dividend Distributable
0
2
0
6
5
Retained Earnings
8
PROBLEM 19A-3 (CONCLUDED)
(3) COUNTRY VIEW CORPORATION
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 201X
Retained Earnings, Jan. 1, 201X
Add: Net Income for 201X
0
0
0
Deduct: Dividends Declared in 201X
1
6
0
$157
0
0
0
00
PROBLEM 19A-4
(1) PIEROTTI CORPORATION
GENERAL JOURNAL PAGE 12
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Oct.
3
Retained Earnings
9
4
5
0
00
Dividends Payable
9
4
5
0
00
Nov.
Dividends Payable
9
4
5
0
00
Cash
9
4
5
0
00
Treasury Stock
5
1
0
0
00
Cash
5
1
0
0
00
Cash
1
4
7
0
00
Treasury Stock
1
0
5
0
00
Paid-in Capital from Treasury Stock
4
2
0
00
Retained Earnings
3
0
0
00
Common Stock Dividend Distributable
8
0
7
6
00
Paid-in Capital in Excess of Par
2
2
4
00
Dec.
Common Stock Dividend Distributable
8
0
7
6
00
8
0
7
6
00
Cash
8
4
0
00
Paid-in Capital from Treasury Stock
6
0
00
Treasury Stock
9
0
0
00
Dec.
Income Summary
0
0
0
00
Retained Earnings
0
0
0
00
PROBLEM 19A-4 (CONCLUDED)
(2) PIEROTTI CORPORATION
STOCKHOLDERS’ EQUITY
Paid-in Capital:
Preferred Stock, $13 par value,
authorized 5,700 shares, 3,500 shares
issued and outstanding
5
Common Stock, $6 par value, authorized
and 8,136 shares outstanding, 210
Shares in Treasury
0
Paid-in Capital in Excess of Par Value– Preferred
0
7
0
4
Paid-in Capital from Treasury Stock
0
Deduct: Treasury Stock (210 shares x $15)
1
SOLUTIONS TO SET B PROBLEMS
PROBLEM 19B-1
a.
(Redemption value
+ Dividends in arrears)
/ Preferred shares
outstanding
= Book value
Preferred
($ 432,000
+ $ 0)
/ 4,000
= $108.00
preferred)
outstanding
= Book value
($ 960,000
outstanding
Preferred
($ 432,000
/ 4,000
= $127.80
preferred)
outstanding
($ 960,000
PROBLEM 19B-2 ROLLIN CORPORATION
GENERAL JOURNAL PAGE 4
Date
201X
Account Titles and Description
PR
Dr.
Cr.
July
2
Retained Earnings
210
0
0
0
00
Dividends Payable
210
0
0
0
00
Aug.
210
0
0
0
00
Cash
210
0
0
0
00
294
0
0
0
00
Common Stock Dividend Distributable
205
8
0
0
00
Paid-in Capital in Excess of Par Value—Stock
2
0
0
00
Sept.
205
8
0
0
00
Common Stock
205
8
0
0
00
337
0
5
0
00
Common Stock Dividend Distributable
157
2
9
0
00
Paid-in Capital in Excess of Par Value—Stock
179
7
6
0
00
Nov.
157
2
9
0
00
Common Stock
157
2
9
0
00
PROBLEM 19B-3
(1) HILLSIDE CORPORATION
GENERAL JOURNAL PAGE 3
Date
201X
Account Titles and Description
PR
Dr.
Cr.
June
4
Treasury Stock
32
4
0
0
00
Cash
32
4
0
0
00
21
Retained Earnings
6
7
9
2
00
Dividends Payable
7
9
2
00
July
13
Dividends Payable
6
7
9
2
00
Cash
7
9
2
00
Sept.
9
Cash
6
8
0
00
Treasury Stock
10
8
0
0
00
Paid-in Capital from Treasury Stock
8
8
0
00
29
Cash
8
8
0
00
Paid-in Capital From Treasury Stock
7
2
0
00
Treasury Stock
21
6
0
0
00
12
Retained Earnings
2
7
2
00
Common Stock Dividend Distributable
19
3
4
4
00
Paid-in Capital in Excess of Par
9
2
8
00
Dec.
31
Income Summary
0
0
0
00
Retained Earnings
54
0
0
0
00
PROBLEM 19B-3 (CONTINUED)
(2) HILLSIDE CORPORATION
STOCKHOLDERS’ EQUITY
Paid-in Capital:
Common Stock, $26 par value, authorized
47,000 shares, 12,400 issued and
outstanding
$322
4
0
0
00
Common Stock Dividend Distributable
3
4
4
00
7
4
4
00
Paid-in Capital in Excess of Par Value —
0
0
0
00
Paid-in Capital in Excess of Par Value —
9
2
8
00
Paid-in Capital from Treasury Stock
1
6
0
00
9
3
6
00
PROBLEM 19B-3 (CONCLUDED)
(3)
HILLSIDE CORPORATION
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 201X
Retained Earnings January 1, 201X
$154
0
0
0
00
Add: Net Income for 201X
54
0
0
0
00
Deduct: Dividends Declared in 201X
35
0
6
4
00
PROBLEM 19B-4
(1) PIERRO CORPORATION
GENERAL JOURNAL PAGE 12
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Oct.
3
Retained Earnings
9
8
7
0
00
Dividends Payable
9
8
7
0
00
Dividends Payable
9
8
7
0
00
Cash
9
8
7
0
00
18
Treasury Stock
4
6
8
0
00
Cash
4
6
8
0
00
Cash
1
2
6
0
00
Treasury Stock
7
8
0
00
4
8
0
00
Retained Earnings
7
9
2
00
Common Stock Dividend Distributable
2
7
2
00
Paid-in Capital in Excess of Par Value—Stock
5
2
0
00
Dec.
Common Stock Dividend Distributable
2
7
2
00
Common Stock
2
7
2
00
Cash
1
5
6
0
00
Paid-in Capital from Treasury Stock
1
3
0
00
Treasury Stock
1
6
9
0
00
Income Summary
0
0
0
00
Retained Earnings
0
0
0
00
PROBLEM 19B-4 (CONCLUDED)
(2)
PIERRO CORPORATION
STOCKHOLDERS’ EQUITY
Paid-in Capital
Preferred Stock, $10 par value,
authorized 6,100 shares 3,800 shares
issued and outstanding
and 12,114 shares outstanding; 170
Paid-in Capital in Excess of Par Value-Preferred
$8
Paid-in Capital in Excess of Par Value —
Paid-in Capital from Treasury Stock
Retained Earnings
FINANCIAL REPORT PROBLEM SOLUTION—Reading Amazon’s Annual Report
Cost of Treasury Stock