Chapter 11: Q2DQ (page 515)
How are organization expenses reported?
Organization expenses are recorded as soon it has been incurred. These expenses are debited to organization expense account.
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Listed below are various transactions that a company incurred during the current year. Indicate the impact on total stockholders’ equity for each scenario. Identify whether stockholders’ equity would increase (I), decrease (D), or have no effect (NE) as a result of each transaction listed below. Consider each transaction independently.
1. A stock dividend equal to 30% of the previously outstanding shares is declared.
2. New shares of common stock are issued for cash.
3. Treasury shares of common stock are purchased (assume the cost method).
4. Cash dividends are paid to shareholders.
Question:
The Commonsection of Cyril Corporation’s balance sheet shows the following:
Preferred stock—6% cumulative, \(25 par value,
10,000 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . \) 250,000
Common stock—\(8 par value, 100,000 shares
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 535,000
Total stockholders’ Common. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)1,585,000
This year’s dividends on preferred stock have been paid. Determine the book value per share of common stock under two separate situations.
1. No preferred dividends are in arrears.
2. Three years of preferred dividends are in arrears.
Rodriguez Corporation issues 19,000 shares of its common stock for \(152,000 cash on February 20.
Prepare journal entries to record this event under each of the following separate situations.
On October 10, the stockholders’ equity of Sherman Systems appears as follows:
Common stock—\(10 par value, 72,000 shares
authorized, issued, and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . \) 720,000
Paid-in capital in excess of par value, common stock . . . . . . . . . . . . . . 216,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 864,000
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(1,800,000
Prepare journal entries to record the following transactions for Sherman Systems.
a. Purchased 5,000 shares of its own common stock at \)25 per share on October 11.
b. Sold 1,000 treasury shares on November 1 for \(31 cash per share.
c. Sold all remaining treasury shares on November 25 for \)20 cash per share.
2. Explain how the company’s equity section changes after the October 11 treasury stock purchase and prepare the revised equity section of its balance sheet at that date.
Question:
At September 30, the end of Beijing Company’s third quarter, the following stockholders’ equity accounts are reported.
Common stock, \(12 par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)360,000
Paid-in capital in excess of par value, common stock . . . . . . . . . . . . . . . 90,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,000
In the fourth quarter, the following entries related to its equity are recorded
Account and explanation | Debit | Credit | |
Oct.2 | Retained Earnings Common Dividend Payable | 60,000 | 60,000 |
Oct.25 | Common Dividend Payable Cash | 60,000 | 60,000 |
Oct.31 | Retained Earnings Common Stock Dividend Distributable Paid-In Capital in Excess of Par Value, Common Stock. | 75,000 | 36,000 39,000 |
Nov.5 | Common Stock Dividend Distributable Common Stock, \(10 Par Value. | 36,000 | 36,000 |
Dec.1 | Memo—Change the title of the Common Stock account to reflect the new par value of \)4 | ||
Dec.31 | Income Summary Retained Earnings | 210,000 | 210,000 |
Required
1. Explain the transaction(s) underlying each journal entry.
2. Complete the following table showing the equity account balances at each indicated date (take into account the beginning balances from September 30).
Sep .30 | Oct.2 | Oct.25 | Oct.31 | Nov.5 | Dec.1 | Dec.31 | |
Common stock | \( 360,000 | ||||||
Common stock dividend distributable | 0 | ||||||
Paid-in capital in excess of par, common stock | 90,000 | ||||||
Retained earnings | 320,000 | ||||||
Total equity | \)770,000 |
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