Accounting Homework Help

EX 13-1

Dividend per Share

OBJ. 3

Internal Insights Inc., a developer of radiology equipment, has stock outstanding as follows: 70,000 shares of cumulative preferred 2% stock, $60 par, and 100,000 shares of $10 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $49,000; second year, $132,000; third year, $146,000; fourth year, $160,000. Compute the dividend per share on each class of stock for each of the four years.

Answer

Check figure: Preferred stock, 1st year: $0.70

EX 13-2

Dividend per Share

OBJ. 3

Lightfoot Inc., a software development firm, has stock outstanding as follows: 40,000 shares of cumulative preferred 1% stock, $125 par, and 100,000 shares of $150 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $36,000; second year, $58,000; third year, $75,000; fourth year, $124,000. Compute the dividend per share on each class of stock for each of the four years.

Answer

Check figure: Preferred stock, 1st year: $0.90

EX 13-3

Entries for Issuing Par Stock

OBJ. 3

On October 31, Pidgeon Stones Inc., a marble contractor, issued for cash 320,000 shares of $5 par common stock at $12, and on November 19, it issued for cash 45,000 shares of preferred stock, $60 par at $72.
1. Journalize the entries for October 31 and November 19.
2. What is the total amount invested (total paid-in capital) by all stockholders as of November 19?

EX 13-4

Entries for Issuing No-Par Stock

OBJ. 3

On February 12, Quality Carpet Inc., a carpet wholesaler, issued for cash 1,000,000 shares of no-par common stock (with a stated value of $0.25) at $1.20, and on August 3, it issued for cash 10,000 shares of preferred stock, $15 par at $21.
1. Journalize the entries for February 12 and August 3, assuming that the common stock is to be credited with the stated value.
2. What is the total amount invested (total paid-in capital) by all stockholders as of August 3?

EX 13-5

Issuing Stock for Assets Other Than Cash

OBJ. 3

On April 5, Fenning Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 30,000 shares of $80 par common stock valued at $112 per share. Journalize the entry to record the transaction.

EX 13-6

Selected Stock Transactions

OBJ. 3

Alpha Sounds Corp., an electric guitar retailer, was organized by Michele Kirby, Paul Glenn, and Gretchen Northway. The charter authorized 1,000,000 shares of common stock with a par of $1. The following transactions affecting stockholders’ equity were completed during the first year of operations:
1. Issued 100,000 shares of stock at par to Paul Glenn for cash.
2. Issued 3,000 shares of stock at par to Michele Kirby for promotional services provided in connection with the organization of the corporation and issued 45,000 shares of stock at par to Michele Kirby for cash.
3. Purchased land and a building from Gretchen Northway in exchange for stock issued at par. The building is mortgaged for $180,000 for 20 years at 6%, and there is accrued interest of $5,200 on the mortgage note at the time of the purchase. It is agreed that the land is to be priced at $60,000 and the building at $225,000 and that Gretchen Northway’s equity will be exchanged for stock at par. The corporation agreed to assume responsibility for paying the mortgage note and the accrued interest.
Journalize the entries to record the transactions.

EX 13-7

Issuing Stock

OBJ. 3

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:

A trial balance with no heading is shown for Willow Creek Nursery. The accounts and their balances are as follows: Cash, debit balance of 3,780,000; Land, debit balance of 840,000; Buildings, debit balance of 2,380,000; Preferred 1% Stock, $80 par, credit balance of 2,800,000; Paid-In Capital in Excess of Par—Preferred Stock, credit balance of 420,000; Common Stock, $30 par, credit balance of 3,600,000; Paid-In Capital in Excess of Par—Common Stock, credit balance of 180,000. A single rule appears below 180,000 and on this same line in the debit column. The total debits and credits are both 7,000,000. A double rule appears below 7,000,000 in both columns.

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.

EX 13-8

Issuing Stock

OBJ. 3

Ergonomics Supply Inc., a wholesaler of office products, was organized on July 1 of the current year, with an authorization of 80,000 shares of preferred 2% stock, $70 par, and 900,000 shares of $11 par common stock. The following selected transactions were completed during the first year of operations:

July	1.	Issued 260,000 shares of common stock at par for cash.
	1.	Issued 2,000 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.
Aug.	7.	Issued 60,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $320,000, $550,000, and $90,000, respectively.
Sept.	20.	Issued 30,000 shares of preferred stock at $74 for cash.

Journalize the transactions.

EX 13-9

Entries for Cash Dividends

OBJ. 4

The declaration, record, and payment dates in connection with a cash dividend of $135,000 on a corporation’s common stock are January 12, March 13, and April 12. Journalize the entries required on each date.

EX 13-10

Entries for Stock Dividends

OBJ. 4

Advanced Life Co. is an HMO for businesses in the Albuquerque area. The following account balances appear on the balance sheet of Advanced Life Co.: Common stock (600,000 shares authorized; 400,000 shares issued), $8 par, $3,200,000; Paid-in capital in excess of par—common stock, $800,000; and retained earnings, $25,600,000. The board of directors declared a 2% stock dividend when the market price of the stock was $19 a share. Advanced Life Co. reported no income or loss for the current year.
1. 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.
2. Determine the following amounts before the stock dividend was declared: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders’ equity.
  
  Answer
  
  Check figure: (1) $4,000,000 (3) $29,600,000
3. 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.

EX 13-11

Effect of Stock Split

OBJ. 5

Yeoman Grill Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Southwest. Yeoman Grill Restaurant Corporation, which had 35,000 shares of common stock outstanding, declared a 3-for-1 stock split.
1. What will be the number of shares outstanding after the split?
2. If the common stock had a market price of $270 per share before the stock split, what would be an approximate market price per share after the split?

EX 13-12

Effect of Cash Dividend and Stock Split

OBJ. 4, 5

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

		Assets	Liabilities	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)	_____________	_____________	_____________

EX 13-13

Selected Dividend Transactions, Stock Split

OBJ. 4, 5

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.

EX 13-14

Treasury Stock Transactions

OBJ. 6

Lava Lake Inc. bottles and distributes spring water. On February 11 of the current year, Lava Lake reacquired 180,000 shares of its common stock at $17 per share. On April 30, Lava Lake Inc. sold 90,000 of the reacquired shares at $20 per share. On August 22, Lava Lake Inc. sold 30,000 shares at $15 per share.
1. Journalize the transactions of February 11, April 30, and August 22.
2. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
  
  Answer
  
  Check figure: $210,000 credit
3. For what reasons might Lava Lake have purchased the treasury stock?

EX 13-15

Treasury Stock Transactions

OBJ. 6, 7

Yard Spray Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On January 31 of the current year, Yard Spray Inc. reacquired 42,000 shares of its common stock at $36 per share. On June 14, 19,000 of the reacquired shares were sold at $43 per share, and on November 23, 16,000 of the reacquired shares were sold at $39.
1. Journalize the transactions of January 31, June 14, and November 23.
2. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
  
  Answer
  
  Check figure: $181,000 credit
3. What is the balance in Treasury Stock on December 31 of the current year?
4. How will the balance in Treasury Stock be reported on the balance sheet?

EX 13-16

Treasury Stock Transactions

OBJ. 6, 7

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.
1. Journalize the transactions of May 14, September 6, and November 30.
2. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
  
  Answer
  
  Check figure: $55,500 credit
3. Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the balance sheet?
4. For what reasons might Biscayne Bay Water Inc. have purchased the treasury stock?

EX 13-17

Reporting Paid-In Capital

OBJ. 7

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

Common Stock, no par, $22 stated value	$ 5,500,000
Paid-In Capital from Sale of Treasury Stock	35,000
Paid-In Capital in Excess of Par—Preferred Stock	165,000
Paid-In Capital in Excess of Stated Value—Common Stock	380,000
Preferred 2% Stock, $110 par	6,050,000
Retained Earnings	31,036,000

Prepare the Paid-In Capital portion of the Stockholders’ Equity section of the balance sheet using Method 1 of Exhibit 8. There are 300,000 shares of common stock authorized and 100,000 shares of preferred stock authorized.

Answer

Check figure: Total paid-in capital, $12,130,000

EX 13-18

Stockholders’ Equity Section of Balance Sheet

OBJ. 7

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 using Method 1 of Exhibit 8. Eighty thousand shares of common stock are authorized, and 9,000 shares have been reacquired.

Answer

Check figure: Total stockholders’ equity, $23,676,000

EX 13-19

Stockholders’ Equity Section of Balance Sheet

OBJ. 7

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 8.

Answer

Check figure: Total stockholders’ equity, $89,100,000

EX 13-20

Retained Earnings Statement

OBJ. 7

Pressure Pumps Corporation, a manufacturer of industrial pumps, reports the following results for the year ended January 31, 20Y2:

Retained earnings, February 1, 20Y1

$29,842,000

Net income

4,082,000

Cash dividends declared

500,000

Stock dividends declared

1,301,000

Prepare a retained earnings statement for the fiscal year ended January 31, 20Y2.

Answer

Check figure: Retained earnings, January 31, $32,123,000

EX 13-21

Stockholders’ Equity Section of Balance Sheet

OBJ. 7

The following Stockholders’ Equity section of the balance sheet prepared as of the end of the current year:
1. List the errors in the preceding statement of stockholders’ equity.
2. Prepare a corrected statement of stockholders’ equity.
Answer

Check figure: Corrected total stockholders’ equity, $84,070,000

EX 13-22

Statement of Stockholders’ Equity

OBJ. 7

The stockholders’ equity T accounts of I-Cards Inc. for the fiscal year ended December 31, 20Y9, are as follows. Prepare a statement of stockholders’ equity for the year ended December 31, 20Y9.

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
Sept. 30	Dividend	69,000		(net income)	3,780,000
Dec. 31	Dividend	69,000
			Dec. 31	Balance	14,879,000

Answer

Check figure: Total stockholders’ equity, Dec. 31, $21,587,000

EX 13-23

EPS

OBJ. 8

PickApart Arts, Inc., had earnings of $565,300 for the year. The company had 55,000 shares of common stock outstanding during the year and issued 23,000 shares of $50 par value preferred stock. The preferred stock has a dividend of $2.10 per share. There were no transactions in either common or preferred stock during the year.

Determine the basic earnings per share for PickApart Arts for the year.

EX 13-24

EPS

OBJ. 8

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 (loss)	$(6,837)	$1,660	$1,407
Preferred dividends	$14	$14	$14
Average number of common shares outstanding	517	512	499

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

Answer

Check figure: Year 1, $2.79 per share
Evaluate the growth in earnings per share for the three years in comparison to the growth in net income for the three years.

EX 13-25

EPS

OBJ. 8

Caterpillar Inc. and Deere & Company are two large companies that manufacture and sell equipment used in the construction, mining, agricultural, and forestry industries. The companies reported the following data (in millions) for two recent years:

Caterpillar

Deere

Year 2

Year 1

Year 2

Year 1

Net income

$6,147

$754

$2,368

$2,159

Average number of common shares outstanding

591

592

323

320
1. Determine the earnings per share in Year 2 and Year 1 for each company. Neither Caterpillar nor Deere have any preferred stock outstanding. Round to the nearest cent.
2. Evaluate the relative profitability of the two companies.

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