Chapter 13: 7RQ (page 707)
What are the two basic sources of stockholders’ equity? Describe each source.
The two primary sources of stockholders' equity are retained earnings and paid-in capital.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Question: Journalizing issuance of stock—at par and at a premium
Colorado Corporation has two classes of stock: common, \(3 par value; and preferred, \)30 par value.
Requirements
2. Journalize Colorado’s issuance of 4,500 shares of preferred stock for a total of $135,000
How does preferred stock differ from common stock?
Question - Describing corporation characteristics
Due to recent beef recalls, Southwest Steakhouse is considering incorporating. Bob, the owner, wants to protect his personal assets in the event the restaurant is sued.
Requirements
1. Which advantage of incorporating is most applicable? What are other advantages of organizing as a corporate entity?
Computing earnings per share, price/earnings ratio, and rate of return on common stockholders’ equity
Bianchi Company reported these figures for 2018 and 2017:
2018 2017
Income Statement—partial:
Net Income \( 34,380 \) 18,000
Dec. 31, 2018 Dec. 31, 2017
Balance Sheet—partial:
Total Assets \( 285,000 \) 280,000
Paid-In Capital:
Preferred Stock—11%, \(9 Par Value; 60,000 shares
authorized, 12,000 shares issued and outstanding
\) 108,000 \( 108,000
Common Stock—\)2 Par Value; 60,000 shares
authorized, 50,000 shares issued and outstanding
100,000 100,000
Paid-In Capital in Excess of Par—Common 14,000 14,000
Retained Earnings 60,500 38,000
Total Stockholders’ Equity \( 282,500 \) 260,000
Requirements
1. Compute Bianchi Company’s earnings per share for 2018. Assume the company paid the minimum preferred dividend during 2018. Round to the nearest cent.
Journalizing stock issuance and cash dividends and preparing the stockholders’ equity section of the balance sheet
C-Mobile Wireless needed additional capital to expand, so the business incorporated. The charter from the state of Georgia authorizes C-Mobile to issue 120,000 shares of 9%, \(150 par value cumulative preferred stock, and 140,000 shares of \)3 par value common stock. During the first month, C-Mobile completed the following transactions:
Oct. 2 Issued 18,000 shares of common stock for a building with a market value of \(260,000.
6 Issued 650 shares of preferred stock for \)160 per share.
9 Issued 14,000 shares of common stock for cash of \(84,000.
10 Declared a \)13,000 cash dividend for stockholders of record on Oct. 20. Use a separate Dividends Payable account for preferred and common stock.
25 Paid the cash dividend.
Requirements
1. Record the transactions in the general journal.
2. Prepare the stockholders’ equity section of C-Mobile’s balance sheet at October 31, 2018. Assume C-Mobile’s net income for the month was $95,000.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
