Chapter 13: 8RQ (page 707)
What account is used to record the premium when issuing common stock? What type of account is this?
Paid-In Capital in Excess of Par is used to record the premium when issuing common stock and is an equity account.
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Computing rate of return on common stockholders’ equity Wyler, Inc.’s 2018 balance sheet reported the following items—with 2017 figures given for comparison:
Total Assets Total Liabilities and Stockholders’ Equity Total Liabilities Total Stockholders’ Equity (all common) WYLER, INC. Balance Sheet As of December 31, 2018, and December 31, 2017 \( 39,600 December 31, 2018 17,100 22,500 18,500 14,962 December 31, 2017 \) 39,600 \( 33,462 \) 33,462 Net income for 2018 was $3,690.
Compute Wyler’s rate of return on common stockholders’ equity for 2018.
Journalizing dividend and treasury stock transactions, preparing a statement of retained earnings, and preparing stockholders’ equity
The balance sheet of Goldstein Management Consulting, Inc. at December 31, 2017, reported the following stockholders’ equity:
Common Stock—\(10 Par Value; 350,000 shares
authorized, 32,000 shares issued and outstanding
Paid-In Capital:
160,000
\) 320,000
650,000
Retained Earnings
Total Stockholders’ Equity \( 810,000
Stockholders’ Equity
Paid-In Capital in Excess of Par—Common 330,000
Total Paid-In Capital
During 2018, Goldstein completed the following selected transactions:
Feb. 6 Declared a 15% stock dividend on common stock. The market value of
Goldstein’s stock was \)25 per share.
15 Distributed the stock dividend.
Jul. 29 Purchased 2,300 shares of treasury stock at \(25 per share.
Nov. 27 Declared a \)0.10 per share cash dividend on the common stock outstanding.
Requirements
2. Prepare a retained earnings statement for the year ended December 31, 2018. Assume Goldstein’s net income for the year was $90,000.
Computing dividends on preferred and common stock and journalizing
Northern Communications has the following stockholders’ equity on December 31,
2018:
Preferred Stock—5%, \(11 Par Value; 150,000 shares authorized, 20,000 shares issued and outstanding
Paid-In Capital:
\) 220,000
760,000
Stockholders’ Equity
Paid-In Capital in Excess of Par—Common 680,0006
Total Paid-In Capital 1,660,000
Retained Earnings 200,000
Total Stockholders’ Equity \( 1,860,000
Common Stock—\)2 Par Value; 575,000 shares
authorized, 380,000 shares issued and outstanding
Requirements
1. Assuming the preferred stock is cumulative, compute the amount of dividends to preferred stockholders and to common stockholders for 2018 and 2019 if total dividends are \(9,000 in 2018 and \)45,000 in 2019. Assume no changes in preferred stock and common stock in 2019.
What is treasury stock? What type of account is Treasury Stock, and what is the account’s normal balance?
What is the price/earnings ratio, and how is it calculated?
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