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Dividends & Stockholder's Equity

Stocks and Dividends. See attached file for full problem description.

Question 4 . Multiple choice
1. Troy Corporation reports at the end of 2004.
Net Income for 2004 $120,000
Authorized # of shares 60,000; Issued # of shares 40,000; Shares in treasury 10,000
It s earnings per share for 2004 is: (a) $2 (b) $3 (c) $4

2. Bartolotta Co. had a book value per share of $22. Then it issued a 10% stock dividend. Subsequently it declared a cash dividend of $2 per share. The resulting book value per share was:

(a) $20 (b) $20.20 (c) $24 (d) 18 (e) some other amount __________

Question 5 . Sellfast Corporation reported the following for 2001.
1/1/01 12/31/01
Paid In Capital 400,000 412,000
Retained earnings 110,000 140,000
Treasury stock (10,000) -
Total OE 520,000 552,000

Net Income for 2001 $48,000
Cash dividends declared in 2001 $10,000

Sellfast also sold some treasury stock and declared some stock dividends in 2001. There were no other financing related events during the year.

(i) What was the journal entry for stock dividends during the year?

(ii) What was the journal entry for Treasury stock sales during the year?

Question 6. Firm Acquiree's balance sheet on 12/31/00 is given below.
Cash 5,000 Liabilities 10,000
Other Assest 60,000 Owner's Equity 55,000
Total 65,000 Total 65,000

On 1/1/01, Acquirer acquires Acquiree by paying $100,000 in cash to the former owners of Acquiree for all of their stock and then merges Acquiree into itself.
Given that the deal was struck after Acquirer performed a valuation that noted that:
- the fair market value of the other assets is $90,000
- the fair market value of the liabilities currently on Acquiree's books is $10,000 as reported
- the fair market value of a patent filed, obtained, and held by Acquiree is $4,000
- and Acquirer will also be assuming $2,000 in Acquiree liabilities currently "off-balance sheet"

Part 1. Record the acquisition transaction for Acquirer using the balance sheet equation format below.
Assets = Liab. + OE

Part 2. If half of the goodwill created above is seen to be for "In Process R&D" what will be the next transaction recorded by Acquirer?

Assets = Liab. + OE

Part 3. a. What will be the accounting for the patent subsequently?

b. What will be the accounting for the goodwill subsequently?


Solution Summary

This solution provides detailed answers for a lot of multiple choice questions relating to Stockholder's Equity and goodwill.