On October 31, the stockholders' equity section of Omar Company consists of common stock $600,000 and retained earnings $900,000

E11-15 On October 31, the stockholders' equity section of Omar Company consists of common stock $600,000 and retained earnings $900,000. Omar is considering the following two courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share.

Instructions
Prepare a tabular summary of the effects of the alternative actions on the components of stockholders' equity, outstanding shares, and book value per share. Use the following column headings:

Before Action, After Stock Dividend, and After Stock Split.


Click here for the solution: On October 31, the stockholders' equity section of Omar Company consists of common stock $600,000 and retained earnings $900,000

The stockholders' equity section of Jarvis Corporation at December 31 is as follows

The stockholders' equity section of Jarvis Corporation at December 31 is as follows.

JARVIS CORPORATION
Balance Sheet (partial)

Paid-in capital
Preferred stock, cumulative, 10,000 shares authorized, 6,000 shares issued $ 300,000
and outstanding
Common stock, no par, 750,000 shares authorized, 600,000 shares issued 1,200,000

Total paid-in capital 1,500,000
Retained earnings 1,858,000

Total paid-in capital and retained earnings 3,358,000
Less: Treasury stock (10,000 common shares) (64,000)
Total stockholders' equity $3,294,000

Instructions
From a review of the stockholders’ equity section, as chief accountant, write a memo to the president of the company answering the following questions.
(a) How many shares of common stock are outstanding?
(b) Assuming there is a stated value, what is the stated value of the common stock?
(c) What is the par value of the preferred stock?
(d) If the annual dividend on preferred stock is $30,000, what is the dividend rate on preferred stock?
(e) If dividends of $60,000 were in arrears on preferred stock, what would be the balance in Retained Earnings?


Click here for the solution: The stockholders' equity section of Jarvis Corporation at December 31 is as follows

The stockholders' equity accounts of Hashmi Company at January 1, 2010, are as follows

P14-2A The stockholders' equity accounts of Hashmi Company at January 1, 2010, are as follows.

Preferred Stock, 6%, $50 par : $600,000
Common Stock, $5 par: 800,000
Paid-in Capital in Excess of Par Value-Preferred Stock: 200,000
Paid-in Capital in Excess of Par Value-Common Stock: 300,000
Retained Earnings: 800,000

There were no dividends in arrears on preferred stock. During 2010, the company had the following transactions and events.

July 1 Declared a $0.50 cash dividend on common stock.
Aug. 1 Discovered $25,000 understatement of 2009 depreciation. Ignore income taxes.
Sept. 1 Paid the cash dividend declared on July 1.
Dec. 1 Declared a 10% stock dividend on common stock when the market value of the stock was $18 per share.
Dec. 15 Declared a 6% cash dividend on preferred stock payable January 15, 2011.
Dec. 31 Determined that net income for the year was $355,000.
Dec. 31 Recognized a $200,000 restriction of retained earnings for plant expansion.

Instructions
(a) Journalize the transactions, events, and closing entry.
(b) Enter the beginning balances in the accounts, and post to the stockholders' equity accounts. (Note: Open additional stockholders' equity accounts as needed.)
(c) Prepare a retained earnings statement for the year.
(d) Prepare a stockholders' equity section at December 31, 2010.


Click here for the solution: The stockholders' equity accounts of Hashmi Company at January 1, 2010, are as follows

On October 31, the stockholders’ equity section of Huth Company consists of common stock $300,000 and retained earnings $900,000

On October 31, the stockholders’ equity section of Huth Company consists of common stock $300,000 and retained earnings $900,000. Huth is considering the following two courses of action:

(1) Declaring a 5% stock dividend on the 30,000, $10 par value shares outstanding, or
(2) Effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share.

Instructions
Prepare a tabular summary of the effects of the alternative actions on the components of stockholders’ equity, outstanding shares, and par value per share. Use the following column headings: Before Action, After Stock Dividend, and After Stock Split


Click here for the solution: On October 31, the stockholders’ equity section of Huth Company consists of common stock $300,000 and retained earnings $900,000

Corporate executives sometimes abuse their positions by overpaying themselves at the expense of stockholders

Corporate executives sometimes abuse their positions by overpaying themselves at the expense of stockholders. When that happens are the executives' gains dollar-for-dollar losses to stockholders or can investors lose more or less than the amounts by which the executives profit? Explain thoroughly.


Click here for the solution: Corporate executives sometimes abuse their positions by overpaying themselves at the expense of stockholders

The following stockholders' equity accounts arranged alphabetically are in the ledger of McGrath Corporation at December 31, 2011

P11-8A The following stockholders' equity accounts arranged alphabetically are in the ledger of McGrath Corporation at December 31, 2011.

Common Stock ($10 stated value) $1,500,000
Paid-in Capital from Treasury Stock 6,000
Paid-in Capital in Excess of Stated Value-Common Stock 690,000
Paid-in Capital in Excess of Par Value-Preferred Stock 288,400
Preferred Stock (8%, $100 par, noncumulative) 400,000
Retained Earnings 776,000
Treasury Stock-Common (8,000 shares) 88,000
Complete the stockholders' equity section at December 31, 2011.

Click here for the solution: The following stockholders' equity accounts arranged alphabetically are in the ledger of McGrath Corporation at December 31, 2011