SOLUTIONS TO ASSIGNMENTS
EXERCISE 14-1
(a) Jan. 10 Cash (70,000 X $5)....................................... 350,000
Common Stock.................................................. 350,000
July 1 Cash (40,000 X $7)....................................... 280,000
Common Stock (40,000 X $5).......................... 200,000
Paid-in Capital in Excess of
Par Value (40,000 X $2)................................ 80,000
(b) Jan. 10 Cash (70,000 X $5)....................................... 350,000
Common Stock (70,000 X $1).......................... 70,000
Paid-in Capital in Excess of
Stated Value (70,000 X $4)........................... 280,000
July 1 Cash (40,000 X $7)....................................... 280,000
Common Stock (40,000 X $1).......................... 40,000
Paid-in Capital in Excess of
Stated Value (40,000 X $6)........................... 240,000
EXERCISE 14-3
(1) Land................................................................................. 113,000
Common Stock (5,000 X $20)............................................ 100,000
Paid-in Capital in Excess of Par Value............................ 13,000
(2) Land (20,000 X $12)...................................................... 240,000
Common Stock (20,000 X $10).......................................... 200,000
Paid-in Capital in Excess of Par Value............................ 40,000
(20,000 X $2)
EXERCISE 14-4
(a) Mar. 1 Treasury Stock (50,000 X $15).................. 750,000
Cash...................................................................... 750,000
July 1 Cash (10,000 X $17)..................................... 170,000
Treasury Stock (10,000 X $15)........................ 150,000
Paid-in Capital from Treasury
Stock (10,000 X $2)........................................ 20,000
Sept. 1 Cash (8,000 X $14)....................................... 112,000
Paid-in Capital from Treasury
Stock (8,000 X $1).................................... 8,000
Treasury Stock (8,000 X $15).......................... 120,000
(b) Sept. 1 Cash (8,000 X $11)....................................... 88,000
Paid-in Capital from Treasury
Stock.......................................................... 20,000
Retained Earnings....................................... 12,000
Treasury Stock (8,000 X $15).......................... 120,000
EXERCISE 14-5
(a) Feb. 1 Cash (30,000 X $51)................................ 1,530,000
Preferred Stock................................................ 1,500,000
(30,000 X $50)
Paid-in Capital in Excess
of Par Value—Preferred
Stock (30,000 X $1)...................................... 30,000
July 1 Cash (12,000 X $57)................................ 684,000
Preferred Stock................................................ 600,000
(12,000 X $50)
Paid-in Capital in Excess
of Par Value—Preferred
Stock (12,000 X $7)...................................... 84,000
(b)
Preferred Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Feb. 1 July 1 |
|
|
|
|
|
|
|
1,500,000 600,000 |
|
1,500,000 2,100,000 |
Paid-in Capital in Excess of Par Value—Preferred Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Feb. 1 July 1 |
|
|
|
|
|
|
|
30,000 84,000 |
|
30,000 114,000 |
(c) Preferred stock—listed first in paid-in capital under capital stock.
Paid-in Capital in Excess of Par Value—Preferred Stock—listed first under additional paid-in capital.
EXERCISE 14-6
(a) Preferred Stock (2,200 X $100)................................... 220,000
Common Stock (11,000 X $15).......................................... 165,000
Paid-in Capital in Excess of Par Value—
Common Stock................................................................ 55,000
(b) The
entry is the same as in (a) because market values are ignored in
accounting for the conversion of preferred stock.
(c) Preferred Stock (2,200 X $100)................................... 220,000
Common Stock (17,600 X $10).......................................... 176,000
Paid-in Capital in Excess of Par Value—
Common Stock................................................................ 44,000
EXERCISE 14-8
MEMO
To: President
From: Your name , Chief Accountant
Re: Questions about Stockholders’ Equity Selection
Your memorandum about the stockholders’ equity section was received this morning. I hope the following will answer your questions.
(a) Common stock outstanding is 585,000 shares. (Issued shares 600,000 less treasury shares 15,000.)
(b) The stated value of the common stock is $3 per share. (Common stock issued $1,800,000 ÷ 600,000 shares.)
(c) The par value of the preferred stock is $100 per share. (Preferred stock $600,000 ÷ 6,000 shares.)
(d) The dividend rate is 6% ($36,000 ÷ $600,000).
(e) The Retained Earnings balance is still $1,258,000. Cumulative dividends in arrears are only disclosed in the notes to the financial statements.
If I can be of further help, please contact me.
|
PROBLEM 14-2A |
(a) Mar. 1 Treasury Stock (5,000 X $7).......................... 35,000
Cash....................................................................... 35,000
June 1 Cash (1,000 X $12).......................................... 12,000
Treasury Stock (1,000 X $7).............................. 7,000
Paid-in Capital from Treasury
Stock (1,000 X $5)........................................... 5,000
Sept. 1 Cash (2,000 X $9)............................................. 18,000
Treasury Stock (2,000 X $7).............................. 14,000
Paid-in Capital from Treasury
Stock (2,000 X $2)........................................... 4,000
Dec. 1 Cash (1,000 X $6)............................................. 6,000
Paid-in Capital from Treasury Stock........... 1,000
(1,000 X $1)
Treasury Stock (1,000 X $7).............................. 7,000
31 Income Summary...................................... 50,000
Retained Earnings.............................................. 50,000
(b)
Paid-in Capital from Treasury Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
June 1 Sept. 1 Dec. 1 |
|
|
|
J10 J10 J10 |
|
1,000 |
|
5,000 4,000 |
|
5,000 9,000 8,000 |
Treasury Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Mar. 1 June 1 Sept. 1 Dec. 1 |
|
|
|
J10 J10 J10 J10 |
|
35,000 |
|
7,000 14,000 7,000 |
|
35,000 28,000 14,000 7,000 |
PROBLEM 14-2A (Continued)
Retained Earnings
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 Dec. 31 |
|
Balance |
|
T J10 |
|
|
|
50,000 |
|
100,000 150,000 |
(c) GORE CORPORATION
Stockholders’ equity
Paid-in capital
Capital stock
Common stock, $5 par,
100,000 shares issued and
99,000 outstanding...................................... $500,000
Additional paid-in capital
In excess of par value..................... $200,000
From treasury stock.......................
8,000
Total additional paid-in
capital..................................................... 208,000
Total paid-in capital................................. 708,000
Retained earnings............................................................ 150,000
Total paid-in capital and
retained earnings................................ 858,000
Less: Treasury stock (1,000 common
shares, at cost)................................................. 7,000
Total stockholders’
equity...................................................... $851,000
|
PROBLEM 14-3A |
(a) Feb. 1 Cash............................................................... 100,000
Common Stock (20,000 X $1).......................... 20,000
Paid-in Capital in Excess of
Stated Value—Common
Stock ($100,000 — $20,000)........................ 80,000
Apr. 14 Cash............................................................... 28,000
Paid-in Capital from Common
Treasury Stock............................................. 4,000
($28,000 – $24,000)
Treasury Stock—Common............................. 24,000
(6,000 X $4)
Sept. 3 Patent............................................................ 25,000
Common Stock (5,000 X $1)............................ 5,000
Paid-in Capital in Excess of
Stated Value—Common
Stock ($25,000 – $5,000).............................. 20,000
Nov. 10 Treasury Stock—Common....................... 6,000
Cash..................................................................... 6,000
Dec. 31 Income Summary........................................ 402,000
Retained Earnings............................................ 402,000
(b)
Preferred Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 |
|
Balance |
|
T |
|
|
|
|
|
400,000 |
Common Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 Feb. 1 Sept. 3 |
|
Balance |
|
T J5 J5 |
|
|
|
20,000 5,000 |
|
1,000,000 1,020,000 1,025,000 |
Paid-in Capital in Excess of Par Value—Preferred Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 |
|
Balance |
|
T |
|
|
|
|
|
100,000 |
Paid-in Capital in Excess of Stated Value—Common Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 Feb. 1 Sept. 3 |
|
Balance |
|
T J5 J5 |
|
|
|
80,000 20,000 |
|
1,450,000 1,530,000 1,550,000 |
Retained Earnings
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 Dec. 31 |
|
Balance |
|
T J5 |
|
|
|
402,000 |
|
1,816,000 2,218,000 |
Treasury Stock—Common
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 Apr. 14 Nov. 10 |
|
Balance |
|
T J5 J5 |
|
6,000 |
|
24,000 |
|
40,000 16,000 22,000 |
Paid-in Capital from Common Treasury Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Apr. 14 |
|
|
|
J5 |
|
|
|
4,000 |
|
4,000 |
(c) NOTAH BEGAY CORPORATION
Stockholders’ equity
Paid-in capital
Capital stock
12% Preferred stock, $50
par value, cumulative,
10,000 shares authorized,
8,000 shares issued and
outstanding.................................................... $ 400,000
Common stock, no par,
$1 stated value,
2,000,000 shares authorized,
1,025,000 shares issued
and 1,020,000 shares
outstanding.................................................... 1,025,000
Total capital stock..................................... 1,425,000
Additional paid-in capital
In excess of par value—
preferred stock.......................... $ 100,000
In excess of stated value—
common stock........................... 1,550,000
From common treasury
stock............................................ 4,000
Total additional paid-in
capital...................................................... 1,654,000
Total paid-in capital................................... 3,079,000
Retained earnings (see Note X).................................... 2,218,000
Total paid-in capital and
retained earnings.................................. 5,297,000
Less: Treasury stock (5,000 common
shares).............................................................. 22,000
Total stockholders’
equity....................................................... $5,275,000
Note X: Dividends on preferred stock totaling $48,000 [8,000X(12%X$50)] are in arrears.
(d) Total stockholders’ equity.................................................. $5,275,000
Less: Preferred stock equity
Call price (8,000 X $55)........................ $440,000
Dividends in arrears............................ 48,000 488,000
Common stock equity.......................................................... $4,787,000
Common shares outstanding............................................ 1,020,000
Book value per share........................................................... $4.69
($4,787,000 ÷ 1,020,000)
|
PROBLEM 14-4A |
(a) Feb. 1 Land............................................................... 125,000
Preferred Stock (1,000 X $100)....................... 100,000
Paid-in Capital in Excess of
Par Value—Preferred Stock....................... 25,000
($125,000 – $100,000)
Mar. 1 Cash (1,000 X $125).................................... 125,000
Preferred Stock (1,000 X $100)....................... 100,000
Paid-in Capital in Excess of
Par Value—Preferred Stock....................... 25,000
(1,000 X $25)
July 1 Preferred Stock (2,000 X $100)................ 200,000
Paid-in Capital in Excess of Par
Value—Preferred Stock........................ 20,000
(2,000 X $10)
Common Stock (16,000 X $5).......................... 80,000
Paid-in Capital in Excess of
Par Value—Common Stock........................ 140,000
($220,000 – $80,000)
Sept. 1 Patent (400 X $125)..................................... 50,000
Preferred Stock (400 X $100).......................... 40,000
Paid-in Capital in Excess of
Par Value—Preferred Stock....................... 10,000
(400 X $25)
Dec. 1 Preferred Stock (1,000 X $100)................ 100,000
Paid-in Capital in Excess of Par
Value—Preferred Stock........................ 30,000
(1,000 X $30)
Common Stock (8,000 X $5)............................ 40,000
Paid-in Capital in Excess of
Par Value—Common Stock........................ 90,000
($130,000 – $40,000)
Dec. 31 Income Summary........................................ 260,000
Retained Earnings............................................ 260,000
(b)
Preferred Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 Feb. 1 Mar. 1 July 1 Sept. 1 Dec. 1 |
|
Balance |
|
T J2 J2 J2 J2 J2 |
|
200,000 100,000 |
|
100,000 100,000 40,000 |
|
500,000 600,000 700,000 500,000 540,000 440,000 |
Common Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 July 1 Dec. 1 |
|
Balance |
|
T J2 J2 |
|
|
|
80,000 40,000 |
|
350,000 430,000 470,000 |
Paid-in Capital in Excess of Par Value—Preferred Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 Feb. 1 Mar. 1 July 1 Sept. 1 Dec. 1 |
|
Balance |
|
T J2 J2 J2 J2 J2 |
|
20,000 30,000 |
|
25,000 25,000 10,000 |
|
75,000 100,000 125,000 105,000 115,000 85,000 |
Paid-in Capital in Excess of Par Value—Common Stock
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 July 1 Dec. 1 |
|
Balance |
|
T J2 J2 |
|
|
|
140,000 90,000 |
|
700,000 840,000 930,000 |
PROBLEM 14-4A (Continued)
Retained Earnings
|
Date |
|
Explanation |
|
Ref. |
|
Debit |
|
Credit |
|
Balance |
|
Jan. 1 Dec. 31 |
|
Balance |
|
T J2 |
|
|
|
260,000 |
|
300,000 560,000 |
(c) ROBERTO MORENO CORPORATION
Stockholders’ equity
Paid-in capital
Capital stock
10% Preferred stock,
$100 par value, convertible,
10,000 shares authorized,
4,400 shares issued.................................. $ 440,000
Common stock, $5 par value,
125,000 shares authorized,
94,000 shares issued................................ 470,000
Total capital stock.................................. 910,000
Additional paid-in capital
In excess of par value—
preferred...................................... $ 85,000
In excess of par value—
common....................................... 930,000
Total additional paid-in
capital................................................... 1,015,000
Total paid-in capital................................ 1,925,000
Retained earnings.......................................................... 560,000
Total stockholders’
equity.................................................... $2,485,000