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
Showing posts with label stockholders equity. Show all posts
Showing posts with label stockholders equity. Show all posts
Thursday, January 14, 2016
Sunday, September 27, 2015
The stockholders' equity accounts of Sigma Corporation on January 1, 2010, were as follows
The stockholders' equity accounts of Sigma Corporation on January 1, 2010, were as follows.
Preferred Stock (8%, $100 par noncumulative, 5,000 shares authorized) $300,000
Common Stock ($5 stated value, 300,000 shares authorized) 1,000,000
Paid-in Capital in Excess of Par Value - Preferred Stock 15,000
Paid-in Capital in Excess of Stated Value - Common Stock 480,000
Retained Earnings 688,000
Treasury Stock - Common (5,000 shares) 40,000
During 2010 the corporation had these transactions and events pertaining to its stockholders' equity.
Feb. 1 Issued 5,000 shares of common stock for $30,000.
Mar. 20 Purchased 1,000 additional shares of common treasury stock at $7 per share.
Oct. 1 Declared a 8% cash dividend on preferred stock, payable November 1.
Nov. 1 Paid the dividend declared on October 1.
Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2010.
Dec. 31 Determined that net income for the year was $280,000. Paid the dividend declared on December 1.
Instructions
(a) Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings.)
(b) Enter the beginning balances in the accounts and post the journal entries to the stockholders’ equity accounts. (Use T accounts.)
(c) Prepare the stockholders’ equity section of the balance sheet at December 31, 2010.
(d) Calculate the payout ratio, earnings per share, and return on common stockholders’ equity ratio. (Note: Use the common shares outstanding on January 1 and December 31 to determine the average shares outstanding.)
Click here for the solution: The stockholders' equity accounts of Sigma Corporation on January 1, 2010, were as follows
Preferred Stock (8%, $100 par noncumulative, 5,000 shares authorized) $300,000
Common Stock ($5 stated value, 300,000 shares authorized) 1,000,000
Paid-in Capital in Excess of Par Value - Preferred Stock 15,000
Paid-in Capital in Excess of Stated Value - Common Stock 480,000
Retained Earnings 688,000
Treasury Stock - Common (5,000 shares) 40,000
During 2010 the corporation had these transactions and events pertaining to its stockholders' equity.
Feb. 1 Issued 5,000 shares of common stock for $30,000.
Mar. 20 Purchased 1,000 additional shares of common treasury stock at $7 per share.
Oct. 1 Declared a 8% cash dividend on preferred stock, payable November 1.
Nov. 1 Paid the dividend declared on October 1.
Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2010.
Dec. 31 Determined that net income for the year was $280,000. Paid the dividend declared on December 1.
Instructions
(a) Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings.)
(b) Enter the beginning balances in the accounts and post the journal entries to the stockholders’ equity accounts. (Use T accounts.)
(c) Prepare the stockholders’ equity section of the balance sheet at December 31, 2010.
(d) Calculate the payout ratio, earnings per share, and return on common stockholders’ equity ratio. (Note: Use the common shares outstanding on January 1 and December 31 to determine the average shares outstanding.)
Click here for the solution: The stockholders' equity accounts of Sigma Corporation on January 1, 2010, were as follows
Thursday, September 24, 2015
The post-closing trial balance of Chen Corporation at December 31, 2011, contains the following stockholders’ equity accounts
P11-6B The post-closing trial balance of Chen Corporation at December
31, 2011, contains the following stockholders’ equity accounts.
Preferred Stock (15,000 shares issued) $750,000
Common Stock (250,000 shares issued) 2,500,000
Paid-in Capital in Excess of Par Value-Preferred 250,000
Paid-in Capital in Excess of Par Value-Common 400,000
Common Stock Dividends Distributable 250,000
Retained Earnings 902,000
A review of the accounting records reveals the following.
1. No errors have been made in recording 2011 transactions or in preparing the closing entry for net income.
2. Preferred stock is $50 par, 8%, and cumulative; 15,000 shares have been outstanding since January 1, 2010.
3. Authorized stock is 20,000 shares of preferred, 500,000 shares of common with a $10 par value.
4. The January 1 balance in Retained Earnings was $1,170,000.
5. On July 1, 20,000 shares of common stock were sold for cash at $16 per share.
6. On September 1, the company discovered an understatement error of $90,000 in computing depreciation in 2010. The net of tax effect of $63,000 was properly debited directly to Retained Earnings.
7. A cash dividend of $250,000 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2010.
8. On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $18.
9. Net income for the year was $495,000.
10. On December 31, 2011, the directors authorized disclosure of a $200,000 restriction of retained earnings for plant expansion. (Use Note X.)
Instructions
a. Reproduce the Retained Earnings account for the year.
b. Prepare a retained earnings statement for the year.
(b) Retained earnings $902,000
c. Prepare a stockholders’ equity section at December 31.
(c) Total stockholders’ equity $5,052,000
d. Compute the earnings per share of common stock using 240,000 as the weighted-average shares outstanding for the year.
e. Compute the allocation of the cash dividend to preferred and common stock.
Click here for the solution: The post-closing trial balance of Chen Corporation at December 31, 2011, contains the following stockholders’ equity accounts
Preferred Stock (15,000 shares issued) $750,000
Common Stock (250,000 shares issued) 2,500,000
Paid-in Capital in Excess of Par Value-Preferred 250,000
Paid-in Capital in Excess of Par Value-Common 400,000
Common Stock Dividends Distributable 250,000
Retained Earnings 902,000
A review of the accounting records reveals the following.
1. No errors have been made in recording 2011 transactions or in preparing the closing entry for net income.
2. Preferred stock is $50 par, 8%, and cumulative; 15,000 shares have been outstanding since January 1, 2010.
3. Authorized stock is 20,000 shares of preferred, 500,000 shares of common with a $10 par value.
4. The January 1 balance in Retained Earnings was $1,170,000.
5. On July 1, 20,000 shares of common stock were sold for cash at $16 per share.
6. On September 1, the company discovered an understatement error of $90,000 in computing depreciation in 2010. The net of tax effect of $63,000 was properly debited directly to Retained Earnings.
7. A cash dividend of $250,000 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2010.
8. On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $18.
9. Net income for the year was $495,000.
10. On December 31, 2011, the directors authorized disclosure of a $200,000 restriction of retained earnings for plant expansion. (Use Note X.)
Instructions
a. Reproduce the Retained Earnings account for the year.
b. Prepare a retained earnings statement for the year.
(b) Retained earnings $902,000
c. Prepare a stockholders’ equity section at December 31.
(c) Total stockholders’ equity $5,052,000
d. Compute the earnings per share of common stock using 240,000 as the weighted-average shares outstanding for the year.
e. Compute the allocation of the cash dividend to preferred and common stock.
Click here for the solution: The post-closing trial balance of Chen Corporation at December 31, 2011, contains the following stockholders’ equity accounts
Friday, August 21, 2015
Greeve Corporation had the following stockholders’ equity accounts on January 1, 2006
P12-2A Greeve Corporation had the following stockholders’ equity accounts on January 1, 2006: Common Stock ($1 par) $400,000, Paid-in Capital in Excess of Par Value $500,000, and Retained Earnings $100,000. In 2006, the company had the following treasury stock transactions.
Mar. 1 Purchased 5,000 shares at $7 per share.
June 1 Sold 1,000 shares at $10 per share.
Sept. 1 Sold 2,000 shares at $9 per share.
Dec. 1 Sold 1,000 shares at $5 per share.
Greeve Corporation uses the cost method of accounting for treasury stock. In 2006, the company reported net income of $60,000.
Instructions
(a) Journalize the treasury stock transactions, and prepare the closing entry at December 31,
2006, for net income.
(b) Open accounts for (1) Paid-in Capital from Treasury Stock, (2) Treasury Stock, and (3) Retained Earnings. Post to these accounts using J12 as the posting reference.
(c) Prepare the stockholders’ equity section for Greeve Corporation at December 31, 2006.
Click here for the solution: Greeve Corporation had the following stockholders’ equity accounts on January 1, 2006
Mar. 1 Purchased 5,000 shares at $7 per share.
June 1 Sold 1,000 shares at $10 per share.
Sept. 1 Sold 2,000 shares at $9 per share.
Dec. 1 Sold 1,000 shares at $5 per share.
Greeve Corporation uses the cost method of accounting for treasury stock. In 2006, the company reported net income of $60,000.
Instructions
(a) Journalize the treasury stock transactions, and prepare the closing entry at December 31,
2006, for net income.
(b) Open accounts for (1) Paid-in Capital from Treasury Stock, (2) Treasury Stock, and (3) Retained Earnings. Post to these accounts using J12 as the posting reference.
(c) Prepare the stockholders’ equity section for Greeve Corporation at December 31, 2006.
Click here for the solution: Greeve Corporation had the following stockholders’ equity accounts on January 1, 2006
Tuesday, August 4, 2015
The following account balances relate to the stockholders’ equity accounts of Patil Corp. at year-end
P12-2A The following account balances relate to the stockholders’ equity accounts of Patil Corp. at year-end.
2012 2011
Common stock, 10,500 and 10,000 shares, respectively, for 2012 and 2011 $160,800 $140,000
Preferred stock, 5,000 shares 125,000 125,000
Retained earnings 300,000 270,000
A small stock dividend was declared and issued in 2012. The market value of the shares was $8,800. Cash dividends were $20,000 in both 2012 and 2011. The common stock has no par or stated value.
Determine cash flow effects of changes in equity accounts.
Instructions
a. What was the amount of net income reported by Patil Corp. in 2012?
b. Determine the amounts of any cash inflows or outflows related to the common stock and dividend accounts in 2012.
c. Indicate where each of the cash inflows or outflows identified in (b) would be classified on the statement of cash flows.
Check: (a) Net income $58,800
Click here for the solution: The following account balances relate to the stockholders’ equity accounts of Patil Corp. at year-end
2012 2011
Common stock, 10,500 and 10,000 shares, respectively, for 2012 and 2011 $160,800 $140,000
Preferred stock, 5,000 shares 125,000 125,000
Retained earnings 300,000 270,000
A small stock dividend was declared and issued in 2012. The market value of the shares was $8,800. Cash dividends were $20,000 in both 2012 and 2011. The common stock has no par or stated value.
Determine cash flow effects of changes in equity accounts.
Instructions
a. What was the amount of net income reported by Patil Corp. in 2012?
b. Determine the amounts of any cash inflows or outflows related to the common stock and dividend accounts in 2012.
c. Indicate where each of the cash inflows or outflows identified in (b) would be classified on the statement of cash flows.
Check: (a) Net income $58,800
Click here for the solution: The following account balances relate to the stockholders’ equity accounts of Patil Corp. at year-end
Saturday, August 1, 2015
Elizabeth Company reported the following amounts in the stockholders' equity section of its December 31, 2010, balance sheet
E15-18 (Dividends and Stockholders' Equity Section) Elizabeth Company reported the following amounts in the stockholders' equity section of its December 31, 2010, balance sheet.
Preferred stock, 8%, $100 par (10,000 shares authorized, 2,000 shares issued) $200,000
Common stock, $5 par (100,000 shares authorized, 20,000 shares issued) 100,000
Additional paid-in capital 125,000
Retained earnings 450,000
Total $875,000
During 2011, Elizabeth took part in the following transactions concerning stockholders' equity.
1. Paid the annual 2010 $8 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2010.
2. Purchased 2,700 shares of its own outstanding common stock for $40 per share. Elizabeth uses the cost method.
3. Reissued 700 treasury shares for land valued at $30,000.
4. Issued 500 shares of preferred stock at $105 per share.
5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $45 per share.
6. Issued the stock dividend.
7. Declared the annual 2011 $8 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2012.
Instructions
(a) Prepare journal entries to record the transactions described above.
(b) Prepare the December 31, 2011, stockholders' equity section. Assume 2011 net income was $330,000.
Click here for the solution: Elizabeth Company reported the following amounts in the stockholders' equity section of its December 31, 2010, balance sheet
Preferred stock, 8%, $100 par (10,000 shares authorized, 2,000 shares issued) $200,000
Common stock, $5 par (100,000 shares authorized, 20,000 shares issued) 100,000
Additional paid-in capital 125,000
Retained earnings 450,000
Total $875,000
During 2011, Elizabeth took part in the following transactions concerning stockholders' equity.
1. Paid the annual 2010 $8 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2010.
2. Purchased 2,700 shares of its own outstanding common stock for $40 per share. Elizabeth uses the cost method.
3. Reissued 700 treasury shares for land valued at $30,000.
4. Issued 500 shares of preferred stock at $105 per share.
5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $45 per share.
6. Issued the stock dividend.
7. Declared the annual 2011 $8 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2012.
Instructions
(a) Prepare journal entries to record the transactions described above.
(b) Prepare the December 31, 2011, stockholders' equity section. Assume 2011 net income was $330,000.
Click here for the solution: Elizabeth Company reported the following amounts in the stockholders' equity section of its December 31, 2010, balance sheet
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