Chapter 15: Question 16Q (page 810)
List possible sources of additional paid-in capital.
Additional paid-in capital is generated by issuingcommon stock or preferred stock in excess of par value or premiums on stock issued.
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Wilco Corporation has the following account balances at December 31, 2017.
Common stock, \(5 par value \) 510,000
Treasury stock 90,000
Retained earnings 2,340,000
Paid-in capital in excess of par—common stock 1,320,000
Prepare Wilco’s December 31, 2017, stockholders’ equity section.
(Equity Items on the Balance Sheet) The following are selected transactions that may affect stockholders’ equity.
Instructions
In the following table, indicate the effect each of the nine transactions has on the financial statement elements listed. Use the following code: I = Increase, D = Decrease, NE = No effect.
Item | Asset | Liabilities | Stockholders’ Equity | Paid-in Capital | Retained Earnings | Net Income |
Green Day Corporation has outstanding 400,000 shares of \(10 par value common stock. The corporation declares a 5% stock dividend when the fair value of the stock is \)65 per share. Prepare the journal entries for Green Day Corporation for both the date of declaration and the date of distribution.
(Comparison of Alternative Forms of Financing) Shown below is the liabilities and stockholders’ equity section of the balance sheet for Jana Kingston Company and Mary Ann Benson Company. Each has assets totaling \(4,200,000.
Jana Kingston Co. | |
Current liabilities | \) 300,000 |
Long-term debt, 10% | 1,200,000 |
Common stock (\(20 par) | 2,000,000 |
Retained earnings (Cash dividends, \)328,000) | 700,000 |
\(4,200,000 |
Mary Ann Benson Co. | |
Current liabilities | \) 600,000 |
Common stock (\(20 par) | 2,900,000 |
Retained earnings (Cash dividends, \)328,000) | 700,000 |
\(4,200,000 |
For the year, each company has earned the same income before interest and taxes.
Jana Kingston Co. | Mary Ann Benson Co. | |
Income before interest and taxes | \)1,200,000 | \(1,200,000 |
Interest expense | 120,000 | 0 |
1,080,000 | 1,200,000 | |
Income taxes (45% | 486,000 | 540,000 |
Net income | \) 594,000 | \( 660,000 |
At year end, the market price of Kingston’s stock was \)101 per share, and Benson’s was $63.50.
Instructions
(Preferred Stock Dividends) Cajun Company has outstanding 2,500 shares of \(100 par, 6% preferred stock and 15,000 shares of \)10 par value common. The following schedule shows the amount of dividends paid out over the last 4 years.
Instructions
Allocate the dividends to each type of stock under assumptions (a) and (b). Express your answers in per share amounts using the format shown below
Assumptions | |||||
(a) Preferred, noncumulative And nonparticipating | (b) Preferred, cumulative, and fully participating | ||||
Year | Paid-out | Preferred | Common | Preferred | Common |
2012 | \(13,000 | ||||
2013 | \)26,000 | ||||
2014 | \(57,000 | ||||
2015 | \)76,000 |
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