EX 13-25 EPS

For a recent year, OfficeMax and Staples are two companies competing in the retail office supply business. OfficeMax had a net income of $71,155,000, while Staples had a net income of $881,948,000. OfficeMax had preferred stock of $30,901,000 with preferred dividends of $2,527,000. Staples had no preferred stock. The average outstanding common shares for each company were as follows:


Average Number of
Common Shares Outstanding
OfficeMax 84,908,000
Staples 715,596,000




a. Determine the earnings per share for each company. Round to the nearest cent.
b. Evaluate the relative profitability of the two companies.


Answer:

a. OfficeMax:
Earnings per Share =
Earnings per Share =
Net Income – Preferred Dividends
Avg. Number of Common Shares Outstanding
$71,155,000 – $2,527,000
84,908,000 shares
= $0.81 per share
Staples:
Earnings per Share = Net Income – Preferred Dividends
Avg. Number of Common Shares Outstanding
Earnings per Share = $881,948,000
715,596,000 shares
= $1.23 per share




b. Staples’ net income of $881,948,000 is much greater than OfficeMax’s net income of $71,155,0000. This is because Staples is a much larger business than OfficeMax. Staples also has over 8 times more shares of common stock outstanding than does OfficeMax. Regardless of these size differences, however, earnings per share can be used to compare their relative earnings. As shown above, Staples has a better earnings per share of $1.23 than does OfficeMax, which has earnings per share of $0.81.

EX 13-24 EPS

Pacific Gas and Electric Company is a large gas and electric utility operating in northern and central California. Three recent years of financial data for Pacific Gas and Electric Company are as follows:


Fiscal Years Ended
(in millions)
Year 3 Year 2 Year 1
Net income $1,105 $1,208 $1,312
Preferred dividends $14 $14 $14
Average number of common shares outstanding 382 368 357



a. Determine the earnings per share for fiscal Year 3, Year 2, and Year 1. Round to the nearest cent.

b. Evaluate the growth in earnings per share for the three years in comparison to the growth in net income for the three years.


Answer:

a. Earnings per Share = Net Income – Preferred Dividends
Avg. Number of Common Shares Outstanding
Year 3 Earnings per Share = $1,105 – $14
382 shares
= $2.86 per share
Year 2 Earnings per Share = $1,208 – $14
368 shares
= $3.24 per share
Year 1 Earnings per Share = $1,312 – $14
357 shares
= $3.64 per share
b. Year 3 Year 2 Year 1
Earnings per share………………………………………… $2.86 $3.24 $3.64
Growth as a percent of Year 1 (base year)……………… 79% 89% 100%
Net income…………………………………………………… $1,105 $1,208 $1,312
Growth as a percent of Year 1 (base year)……………… 84% 92% 100%

Net income has declined over the three-year period. Year 2 net income declined 8% (100% – 92%) of Year 1, while Year 3 earnings declined 16% (100% – 84%) of Year 1. The decline in earnings per share is slightly more than the decline in earnings. Year 2 earnings per share declined 11% (100% – 89%) of Year 1, while Year 3 earnings per share declined 21% (100% – 79%) of Year 1.

EX 13-23 EPS

Junkyard Arts, Inc., had earnings of $316,000 for 2014. The company had 40,000 shares of common stock outstanding during the year. In addition, the company issued 15,000 shares of $50 par value preferred stock on January 9, 2014. The preferred stock has a  dividend of $1.60 per share. There were no transactions in either common or preferred stock during 2014.

Determine the basic earnings per share for Junkyard Arts.


Answer:

Earnings per Share = Net Income – Preferred Dividends
Avg. Number of Common Shares Outstanding
Earnings per Share = $316,000 – ($1.60 × 15,000 shares)
40,000 shares
Earnings per Share = $7.30 per share

EX 13-22 Selected dividend transactions, stock split

Selected transactions completed by Canyon Ferry Boating Corporation during the current fiscal year are as follows:

Jan. 8. Split the common stock 2 for 1 and reduced the par from $80 to $40 per share. After the split, there were 150,000 common shares outstanding.

Apr. 30. Declared semiannual dividends of $0.75 on 18,000 shares of preferred stock and $0.28 on the common stock payable on July 1.

July 1. Paid the cash dividends.

Oct. 31. Declared semiannual dividends of $0.75 on the preferred stock and $0.14 on the common stock (before the stock dividend). In addition, a 5% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $52.

Dec. 31. Paid the cash dividends and issued the certificates for the common stock dividend.

Journalize the transactions.


Answer:

Jan. 8 No entry required. The stockholders’ ledger would be revised to
record the increased number of shares held by each stockholder.
Apr. 30 Cash Dividends {[(18,000 shares × $0.75) + 55,500
(150,000 shares × $0.28)] = $13,500 + $42,000 = $55,500}
Cash Dividends Payable 55,500
July 1 Cash Dividends Payable 55,500
Cash 55,500
Oct. 31 Cash Dividends {[(18,000 shares × $0.75) + 34,500
(150,000 shares × $0.14)] = $13,500 + $21,000 = $34,500}
Cash Dividends Payable 34,500
31 Stock Dividends [(150,000 shares × 5% × $52) = $390,000] 390,000
Stock Dividends Distributable (7,500 shares × $40) 300,000
Paid-In Capital in Excess of Par—Common Stock 90,000
[7,500 shares × ($52 – $40)]
Dec. 31 Cash Dividends Payable 34,500
Cash 34,500
31 Stock Dividends Distributable 300,000
Common Stock 300,000

EX 13-21 Effect of cash dividend and stock split

Indicate whether the following actions would (+) increase, (–) decrease, or (0) not affect Indigo Inc.’s total assets, liabilities, and stockholders’ equity:


Stockholders’
Equity
(1) Authorizing and issuing stock certificates
in a stock split _____________ _____________ _____________
(2) Declaring a stock dividend _____________ _____________ _____________
(3) Issuing stock certificates for the stock
dividend declared in (2) _____________ _____________ _____________
(4) Declaring a cash dividend _____________ _____________ _____________
(5) Paying the cash dividend declared in (4) _____________ _____________ _____________



Answer:

Stockholders’
Equity
(1) Authorizing and issuing stock
certificates in a stock split 0 0 0
(2) Declaring a stock dividend 0 0 0
(3) Issuing stock certificates for
the stock dividend declared
in (2) 0 0 0
(4) Declaring a cash dividend 0 + –
(5) Paying the cash dividend
declared in (4) – – 0

EX 13-19 Statement of stockholders’ equity

The stockholders’ equity T accounts of I-Cards Inc. for the current fiscal year ended December 31, 2014, are as follows. Prepare a statement of stockholders’ equity for the fiscal year ended December 31, 2014.



COMMON STOCK
Jan. 1 Balance 4,800,000
Apr. 14 Issued
30,000 shares 1,200,000
Dec. 31 Balance 6,000,000
PAID-IN CAPITAL IN EXCESS OF PAR
Jan. 1 Balance 960,000
Apr. 14 Issued
30,000 shares 300,000
Dec. 31 Balance 1,260,000
TREASURY STOCK
Aug. 7 Purchased
12,000 shares 552,000
RETAINED EARNINGS
Mar. 31 Dividend 69,000 Jan. 1 Balance 11,375,000
June 30 Dividend 69,000 Dec. 31 Closing
(net income) Sept. 30 Dividend 69,000 3,780,000
Dec. 31 Dividend 69,000 Dec. 31 Balance 14,879,000









Answer:

I-CARDS INC.
Statement of Stockholders’ Equity
For the Year Ended December 31, 2014
Common
Stock,
$40 par
Paid-In
Capital in
Excess
of Par
Treasury
Stock
Retained
Earnings Total
Balance, Jan. 1, 2014 $4,800,000 $ 960,000 — $11,375,000 $17,135,000
Issued 30,000 shares
of common stock 1,200,000 300,000 1,500,000
Purchased 12,000 shares
as treasury stock $(552,000) (552,000)
Net income 3,780,000 3,780,000
Dividends (276,000) (276,000)
Balance, Dec. 31, 2014 $6,000,000 $1,260,000 $(552,000) $14,879,000 $21,587,000

EX 13-20 Effect of stock split

Ironhaus Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Southwest. Ironhaus Restaurant Corporation, which had 40,000 shares of common stock outstanding, declared a 4-for-1 stock split.

a. What will be the number of shares outstanding after the split?

b. If the common stock had a market price of $300 per share before the stock split, what would be an approximate market price per share after the split?


Answer:
a. 160,000 shares (40,000 × 4)
b. $75 per share ($300 ÷ 4)

EX 13-18 Stockholders’ Equity section of balance sheet

List the errors in the following Stockholders’ Equity section of the balance sheet prepared as of the end of the current year:


Stockholders’ Equity
Paid-in capital:
Preferred 2% stock, $80 par
(125,000 shares authorized and issued) . . . . . . . . . . . . . . . $10,000,000
Excess of issue price over par . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 $ 10,500,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,700,000
Treasury stock (75,000 shares at cost) . . . . . . . . . . . . . . . . . . . . 1,755,000
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,000
Total paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 109,385,000
Common stock, $20 par (1,000,000 shares
authorized, 825,000 shares issued) . . . . . . . . . . . . . . . . . . . 17,655,000
Organizing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $127,340,000




Answer:
1. Retained earnings is not part of paid-in capital.
2. The cost of treasury stock should be deducted from the total stockholders’ equity.
3. Dividends payable should be included as part of current liabilities and not as part of stockholders’ equity.
4. Common stock should be included as part of paid-in capital.
5. The amount of shares of common stock issued of 825,000 times the par value per share of $20 should be extended as $16,500,000, not $17,655,000. The difference, $1,155,000, probably represents paid-in capital in excess of par.
6. Organizing costs should be expensed as Organizational Expenses when incurred and not included as a part of stockholders’ equity. One possible corrected Stockholders’ Equity section of the balance sheet using Method 1 of Exhibit 4 is as follows:



Stockholders’ Equity
Paid-in capital:
Preferred 2% stock, $80 par (125,000
shares authorized and issued) $10,000,000
Excess of issue price over par 500,000 $ 10,500,000
Common stock, $20 par (1,000,000 shares
authorized, 825,000 shares issued) $16,500,000
Excess of issue price over par 1,155,000 17,655,000
Total paid-in capital $ 28,155,000
Retained earnings* 96,400,000
Total $124,555,000
Deduct treasury stock (75,000 shares at cost) 1,755,000
Total stockholders’ equity $122,800,000


* $96,700,000 – $300,000. Since the organizing costs should have been expensed, the retained earnings should be $300,000 less.

EX 13-17 Retained earnings statement

Atlas Pumps Corporation, a manufacturer of industrial pumps, reports the following results for the year ended January 31, 2014:


Retained earnings, February 1, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,110,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,330,000
Cash dividends declared. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000
Stock dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000


Prepare a retained earnings statement for the fiscal year ended January 31, 2014.


Answer:

ATLAS PUMPS CORPORATION
Retained Earnings Statement
For the Year Ended January 31, 2014
Retained earnings, February 1, 2013 $48,110,000
Net income $9,330,000
Less dividends declared 2,400,000
Increase in retained earnings 6,930,000
Retained earnings, January 31, 2014 $55,040,000

EX 13-16 Stockholders’ Equity section of balance sheet

Specialty Auto Racing Inc. retails racing products for BMWs, Porsches, and Ferraris. The following accounts and their balances appear in the ledger of Specialty Auto Racing Inc. on July 31, the end of the current year:


Common Stock, $36 par. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,080,000
Paid-In Capital from Sale of Treasury Stock—Common. . . . . . . . . . . . . . . . . . . . 340,000
Paid-In Capital in Excess of Par—Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 420,000
Paid-In Capital in Excess of Par—Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 384,000
Preferred 1% Stock, $150 par. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,200,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,684,000
Treasury Stock—Common. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,008,000


Fifty thousand shares of preferred and 300,000 shares of common stock are authorized. There are 24,000 shares of common stock held as treasury stock.

Prepare the Stockholders’ Equity section of the balance sheet as of July 31, the end of the current year using Method 1 of Exhibit 4.


Answer:

Stockholders’ Equity
Paid-in capital:
Preferred 1% stock, $150 par
(50,000 shares authorized,
48,000 shares issued) $ 7,200,000
Excess of issue price over par 384,000 $ 7,584,000
Common stock, $36 par
(300,000 shares authorized,
280,000 shares issued) $10,080,000
Excess of issue price over par 420,000 10,500,000
From sale of treasury stock 340,000
Total paid-in capital $18,424,000
Retained earnings 71,684,000
Total $90,108,000
Deduct treasury common stock
(24,000 shares at cost) 1,008,000
Total stockholders’ equity $89,100,000

EX 13-15 Stockholders’ Equity section of balance sheet

The following accounts and their balances appear in the ledger of Goodale Properties Inc. on June 30 of the current year:


Common Stock, $45 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,060,000
Paid-In Capital from Sale of Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,000
Paid-In Capital in Excess of Par—Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 272,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,553,000
Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324,000


Prepare the Stockholders’ Equity section of the balance sheet as of June 30. Eighty thousand shares of common stock are authorized, and 9,000 shares have been reacquired.


Answer:

Stockholders’ Equity
Paid-in capital:
Common stock, $45 par
(80,000 shares authorized,
68,000 shares issued) $3,060,000
Excess of issue price over par 272,000 $ 3,332,000
From sale of treasury stock 115,000
Total paid-in capital $ 3,447,000
Retained earnings 20,553,000
Total $24,000,000
Deduct treasury stock
(9,000 shares at cost) 324,000
Total stockholders’ equity $23,676,000

EX 13-14 Reporting paid-in capital

The following accounts and their balances were selected from the unadjusted trial balance of Point Loma Group Inc., a freight forwarder, at October 31, the end of the current fiscal year:


Common Stock, no par, $14 stated value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,480,000
Paid-In Capital from Sale of Treasury Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000
Paid-In Capital in Excess of Par—Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 210,000
Paid-In Capital in Excess of Stated Value—Common Stock . . . . . . . . . . . . . . . . 480,000
Preferred 2% Stock, $120 par. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,400,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,500,000


Prepare the Paid-In Capital portion of the Stockholders’ Equity section of the balance sheet using Method 1 of Exhibit 4. There are 375,000 shares of common stock authorized and 85,000 shares of preferred stock authorized.


Answer:

Stockholders’ Equity
Paid-in capital:
Preferred 2% stock, $120 par
(85,000 shares authorized,
70,000 shares issued) $8,400,000
Excess of issue price over par 210,000 $ 8,610,000
Common stock, no par, $14 stated
value (375,000 shares authorized,
320,000 shares issued) $4,480,000
Excess of issue price over par 480,000 4,960,000
From sale of treasury stock 45,000
Total paid-in capital $13,615,000

EX 13-13 Treasury stock transactions

Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water Inc. reacquired 23,500 shares of its common stock at $75 per share. On September 6, Biscayne Bay Water Inc. sold 14,000 of the reacquired shares at $81 per share. The remaining 9,500 shares were sold at $72 per share on November 30.

a. Journalize the transactions of May 14, September 6, and November 30.
b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
c. Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the balance sheet?
d. For what reasons might Biscayne Bay Water Inc. have purchased the treasury stock?


Answer:

a. May 14 Treasury Stock (23,500 shares × $75) 1,762,500
Cash 1,762,500
Sept. 6 Cash (14,000 shares × $81) 1,134,000
Treasury Stock (14,000 shares × $75) 1,050,000
Paid-In Capital from Sale of Treasury
Stock [14,000 shares × ($81 – $75)] 84,000
Nov. 30 Cash (9,500 shares × $72) 684,000
Paid-In Capital from Sale of Treasury
Stock [9,500 shares × ($75 – $72)] 28,500
Treasury Stock (9,500 shares × $75) 712,500





b. $55,500 ($84,000 – $28,500) credit
c. Stockholders’ equity section
d. Biscayne Bay Water Inc. may have purchased the stock to support the market price
of the stock, to provide shares for resale to employees, or for reissuance to employees as a bonus according to stock purchase agreements.

EX 13-12 Treasury stock transactions

Irrigate Smart Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On February 17 of the current year, Irrigate Smart Inc. reacquired 50,000 shares of its common stock at $12 per share. On April 29, 31,000 of the reacquired shares were sold at $15 per share, and on July 31, 12,000 of the reacquired shares were sold at $17.

a. Journalize the transactions of February 17, April 29, and July 31.
b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
c. What is the balance in Treasury Stock on December 31 of the current year?
d. How will the balance in Treasury Stock be reported on the balance sheet?


Answer:

a. Feb. 17 Treasury Stock (50,000 shares × $12) 600,000
Cash 600,000
Apr. 29 Cash (31,000 shares × $15) 465,000
Treasury Stock (31,000 shares × $12) 372,000
Paid-In Capital from Sale of Treasury
Stock [31,000 shares × ($15 – $12)] 93,000
July 31 Cash (12,000 shares × $17) 204,000
Treasury Stock (12,000 shares × $12) 144,000
Paid-In Capital from Sale of Treasury
Stock [12,000 shares × ($17 – $12)] 60,000





b. $153,000 ($93,000 + $60,000) credit
c. $84,000 (7,000 shares × $12) debit
d. The balance in the treasury stock account is reported as a deduction from the total of the paid-in capital and retained earnings.

EX 13-11 Treasury stock transactions

Crystal Lake Inc. bottles and distributes spring water. On March 4 of the current year, Crystal Lake reacquired 33,000 shares of its common stock at $84 per share. On August 27, Crystal Lake Inc. sold 25,000 of the reacquired shares at $90 per share. The remaining 8,000 shares were sold at $80 per share on November 11.

a. Journalize the transactions of March 4, August 27, and November 11.
b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
c. For what reasons might Crystal Lake have purchased the treasury stock?


Answer:

a. Mar. 4 Treasury Stock (33,000 shares × $84) 2,772,000
Cash 2,772,000
Aug. 27 Cash (25,000 shares × $90) 2,250,000
Treasury Stock (25,000 shares × $84) 2,100,000
Paid-In Capital from Sale of Treasury
Stock [25,000 shares × ($90 – $84)] 150,000
Nov. 11 Cash (8,000 shares × $80) 640,000
Paid-In Capital from Sale of Treasury
Stock [8,000 shares × ($84 – $80)] 32,000
Treasury Stock (8,000 shares × $84) 672,000





b. $118,000 ($150,000 – $32,000) credit

c. Crystal Lake may have purchased the stock to support the market price of the stock, to provide shares for resale to employees, or for reissuance to employees as a bonus according to stock purchase agreements.

EX 13-10 Entries for stock dividends

Healthy Living Co. is an HMO for businesses in the Seattle area. The following account balances appear on the balance sheet of Healthy Living Co.: Common stock (400,000 shares authorized; 300,000 shares issued), $18 par, $5,400,000; Paid-in capital in excess of par—common stock, $1,500,000; and Retained earnings, $78,000,000. The board of directors declared a 5% stock dividend when the market price of the stock was $40 a share. Healthy Living Co. reported no income or loss for the current year.

a. Journalize the entries to record (1) the declaration of the dividend, capitalizing an amount equal to market value, and (2) the issuance of the stock certificates.
b. Determine the following amounts before the stock dividend was declared: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders’ equity.
c. Determine the following amounts after the stock dividend was declared and closing entries were recorded at the end of the year: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders’ equity.


Answer:

a. (1)Stock Dividends [(300,000 shares × 5%) × $40] 600,000
Stock Dividends Distributable (15,000 shares × $18) 270,000
Paid-In Capital in Excess of Par—
Common Stock [15,000 shares × ($40 – $18)] 330,000
(2)
 Stock Dividends Distributable 270,000
Common Stock 270,000

b. (1) $6,900,000 ($5,400,000 + $1,500,000)
(2) $78,000,000
(3) $84,900,000 ($6,900,000 + $78,000,000)
c. (1) $7,500,000 ($5,400,000 + $1,500,000 + $270,000 + $330,000)
(2) $77,400,000 ($78,000,000 – $600,000)
(3) $84,900,000 ($7,500,000 + $77,400,000)

EX 13-8 Issuing stock

Workplace Products Inc., a wholesaler of office products, was organized on February 1 of the current year, with an authorization of 10,000 shares of preferred 2% stock, $120 par and 250,000 shares of $25 par common stock. The following selected transactions were completed during the first year of operations:

Feb. 1. Issued 180,000 shares of common stock at par for cash.
1. Issued 400 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.

Mar. 9. Issued 30,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $200,000, $550,000, and $135,000, respectively.

Apr. 13. Issued 8,500 shares of preferred stock at $131 for cash.

Journalize the transactions.


Answer:

Feb. 1 Cash 4,500,000
Common Stock (180,000 shares × $25) 4,500,000
1 Organizational Expenses 10,000
Common Stock (400 shares × $25) 10,000
Mar. 9 Land 200,000
Buildings 550,000
Equipment 135,000
Common Stock (30,000 shares × $25.00) 750,000
Paid-In Capital in Excess of Par—
Common Stock [30,000 shares × ($29.50 – $25.00)] 135,000
Apr. 13 Cash (8,500 shares × $131) 1,113,500
Preferred Stock (8,500 shares × $120) 1,020,000
Paid-In Capital in Excess of Par—
Preferred Stock [8,500 shares × ($131 – $120)] 93,500

EX 13-9 Entries for cash dividends

The declaration, record, and payment dates in connection with a cash dividend of $187,500 on a corporation’s common stock are July 10, August 9, and September 18. Journalize the entries required on each date.


Answer:

July 10 Cash Dividends 187,500
Cash Dividends Payable 187,500
Aug. 9 No entry required.
Sept. 18 Cash Dividends Payable 187,500
Cash 187,500

EX 13-7 Issuing stock

Willow Creek Nursery, with an authorization of 75,000 shares of preferred stock and 200,000 shares of common stock, completed several transactions involving its stock on October 1, the first day of operations. The trial balance at the close of the day follows:



Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,780,000
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 840,000
Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,380,000
Preferred 1% Stock, $80 par. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800,000
Paid-In Capital in Excess of Par—Preferred Stock. . . . . . . . . . . . . . . . . . . 420,000
Common Stock, $30 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,600,000
Paid-In Capital in Excess of Par—Common Stock . . . . . . . . . . . . . . . . . . . 180,000
7,000,000 7,000,000

All shares within each class of stock were sold at the same price. The preferred stock was issued in exchange for the land and buildings.

Journalize the two entries to record the transactions summarized in the trial balance.


Answer:

Oct. 1 Cash (120,000 shares × $31.50) 3,780,000
Common Stock (120,000 shares × $30.00) 3,600,000
Paid-In Capital in Excess of Par—
Common Stock [120,000 shares × ($31.50 – $30.00)] 180,000
Oct. 1 Buildings 2,380,000
Land 840,000
Preferred Stock (35,000 shares × $80) 2,800,000
Paid-In Capital in Excess of Par—
Preferred Stock [35,000 shares × ($92 – $80)] 420,000

EX 13-5 Issuing stock for assets other than cash

On May 10, First Lift Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 3,600 shares of $4 par common stock with a current market price of $28. Journalize the entry to record the transaction.


Answer:

May 10 Land (3,600 shares × $28) 100,800
Common Stock (3,600 shares × $4) 14,400
Paid-In Capital in Excess of Par—
Common Stock [3,600 shares × ($28 – $4)] 86,400