Financial Accounting

Brief Exercise 11-2

On May 10, Paige Corporation issues 2,200 shares of $6 par value common stock for cash at $12 per share.

Journalize the issuance of the stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Brief Exercise 11-3

On June 1, Tucker Inc. issues 1,470 shares of no-par common stock at a cash price of $6 per share.

Journalize the issuance of the shares. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Brief Exercise 11-4

Pringle Inc. issues 8,100 shares of $105 par value preferred stock for cash at $120 per share.

Journalize the issuance of the preferred stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Brief Exercise 11-5

Troutman Corporation has 6,730 shares of common stock outstanding. It declares a $2 per share cash dividend on November 1 to stockholders of record on December 1. The dividend is paid on December 31.

Prepare the entries on the appropriate dates to record the declaration and payment of the cash dividend. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Brief Exercise 11-6

The stockholders’ equity section of Maley Corporation’s balance sheet consists of common stock ($9 par) $1,170,000 and retained earnings $499,200. A 15% stock dividend (19,500 shares) is declared when the market price per share is $17.

(a) Show the before-and-after effects of the dividend on the components of stockholders’ equity.

(b) Show the before-and-after effects of the dividend on the shares outstanding.

Brief Exercise 11-7

Indicate whether each of the following transactions would increase (+), decrease (-), or not affect (N/A) total assets, total liabilities, and total stockholders’ equity.

Brief Exercise 11-8

Leiker Corporation has these accounts at December 31: Common Stock, $11 par, 5,060 shares issued, $55,660; Paid-in Capital in Excess of Par Value $22,290; Retained Earnings $44,020; and Treasury Stock, 470 shares, $10,340.

Prepare the stockholders’ equity section of the balance sheet.

Brief Exercise 11-9

Mike Haden, president of Haden Corporation, believes that it is a good practice for a company to maintain a constant payout of dividends relative to its earnings. Last year, net income was $514,700, and the corporation paid $113,234 in dividends. This year, due to some unusual circumstances, the corporation had income of $1,627,000. Mike expects next year’s net income to be about $797,500.

What was Haden Corporation’s payout ratio last year? If it is to maintain the same payout ratio, what amount of dividends would it pay this year? (Round answers to 0 decimal places, e.g. 125.)

Brief Exercise 11-11

Fugate Inc. is considering these two alternatives to finance its construction of a new $2,288,000 plant:

1. Issuance of 228,800 shares of common stock at the market price of $10 per share.
2. Issuance of $2,288,000, 6% bonds at face value.

Complete the table. (Round earnings per share to 2 decimal places, e.g. $2.66.)

Issue Stock
Issue Bond
Income before interest and taxes $1,633,000 $1,633,000
Interest expense from bonds
Income before income taxes
Income tax expense (30%)
Net income
$
$
Outstanding shares
723,600
Earnings per share
$
$

Do It! Review 11-2

Eddy Corporation began operations on April 1 by issuing 57,030 shares of $3 par value common stock for cash at $15 per share.

Journalize the issuance. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Do It! Review 11-3

Gibbs Corporation purchased 2,020 shares of its $10 par value common stock for $76,760 on August 1. It will hold these in the treasury until resold.

Journalize the treasury stock transaction. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Exercise 11-1

During its first year of operations, Rosa Corporation had these transactions pertaining to its common stock.

Jan. 10 Issued 31,620 shares for cash at $6 per share.
July 1 Issued 64,550 shares for cash at $8 per share.
(a) Journalize the transactions, assuming that the common stock has a par value of $6 per share.
(b) Journalize the transactions, assuming that the common stock is no-par with a stated value of $1 per share.
(Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Exercise 11-5

Garcia Corporation recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation’s capital stock.

May 2 Cash 126,300
    Capital Stock 126,300
       (Issued 8,420 shares of $10 par value common stock at $15 per share)
10 Cash 747,830
    Capital Stock 747,830
       (Issued 14,110 shares of $20 par value preferred stock at $53 per share)
15 Capital Stock 13,200
    Cash 13,200
       (Purchased 880 shares of common stock for the treasury at $15 per share)

On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Problem 11-1A

Tidwell Corporation was organized on January 1, 2014. It is authorized to issue 21,700 shares of 6%, $53 par value preferred stock and 493,800 shares of no-par common stock with a stated value of $1 per share. The following stock transactions were completed during the first year.

Jan. 10 Issued 69,100 shares of common stock for cash at $5 per share.
Mar. 1 Issued 11,800 shares of preferred stock for cash at $54 per share.
May 1 Issued 113,600 shares of common stock for cash at $7 per share.
Sept. 1 Issued 4,200 shares of common stock for cash at $4 per share.
Nov. 1 Issued 3,700 shares of preferred stock for cash at $58 per share.
Journalize the transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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