Chapter 18 the cost of services related to the sale reduced

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