E3-4 On January 1, 2002, the stockholders' equity section of Ted Parge Corporation shows:
common stock ($5 par value) $1,500,000; paid-in capital in excess of par value $1,000,000; and
retained earnings $1,200,000. During the year, the following treasury stock transactions occurred.
Mar. 1 Purchased 50,000 shares for cash at $14 per share.
July 1 Sold 10,000 treasury shares for cash at $16 per share.
Sept. 1 Sold 8,000 treasury shares for cash at $13 per share.
(a) Journalize the treasury stock transactions.
(b) Restate the entry for September 1, assuming the treasury shares were sold at $11 per share.
E3-7 Art Wyatt Corporation recently hired a new accountant with extensive experience in
accounting for partnerships. Because of the pressure of the new job, the accountant was unable
to review what he had learned earlier about corporation accounting. During the first month,
the accountant made the following entries for the corporation's capital stock.
May 2 / Cash 144,000
Capital Stock 144,000
(Issued 12,000 shares of $5 par value common stock
at $12 per share)
10 / Cash 600,000
Capital Stock 600,000
(Issued 10,000 shares of $50 par value preferred stock
at $60 per share)
15 / Capital Stock 14,000
(Purchased 1,000 shares of common stock for the
treasury at $14 per share)
31 / Cash 7,500
Capital Stock 2,500
Gain on Sale of Stock 5,000
(Sold 500 shares of treasury stock at $15 per share)
On the basis of the explanation for each entry, prepare the entry that should have been made
for the capital stock transactions.
E3-10 On October 31, the stockholders' equity section of Hinckley Company consists of com-mon
stock $800,000 and retained earnings $400,000. Hinckley is considering the following two
courses of action: (1) Declare a 10% stock dividend on the 80,000, $10 par value shares out-standing,
or (2) effect a 2-for-1 stock split that will reduce par value to $5 per share. The cur-rent
market price is $15 per share.
Prepare a tabular summary of the effects of the alternative actions on the components of stock-holders'
equity, outstanding shares, and book value per share. Use the following column head-ings:
Before Action, After Stock Dividend, and After Stock Split.
E3-22 Presented below are two independent situations.
1. Roscoe Cosmetics acquired 10% of the 200,000 shares of common stock of Ling Fashion
at a total cost of $13 per share on March 18, 2002. On June 30, Ling declared and paid a
$75,000 dividend. On December 31, Ling reported net income of $122,000 for the year. At
December 31, the market price of Ling Fashion was $14 per share. The stock is classified
2. Juan, Inc., obtained significant influence over Orlando Corporation by buying 30% of Or-lando's
30,000 outstanding shares of common stock at a total cost of $9 per share on Jan-uary
1, 2002. On June 15, Orlando declared and paid a cash dividend of $35,000. On De-cember
31, Orlando reported a net income of $80,000 for the year.
Prepare all the necessary journal entries for 2002 for (a) Roscoe Cosmetics and (b) Juan,
E3-23 At December 31, 2002, the trading securities for Yanu, Inc. are as follows.
Security Cost Fair Value
A $17,500 $16,000
B 12,500 14,000
C 23,000 19,000
(a) Prepare the adjusting entry at December 31, 2002, to report the securities at fair value.
(b) Show the balance sheet and income statement presentation at December 31, 2002, after adjustment to fair value.
P3-13A The following securities are in Hi-Tech Company's portfolio of long-term available-for-
sale securities at December 31, 2002.
On December 31, 2002, the total cost of the portfolio equaled total fair value. Hi-Tech had the
following transactions related to the securities during 2003.
Jan. 20 Sold 1,000 shares of Awixa Corporation common stock at $56 per share
less brokerage fees of $600.
28 Purchased 400 shares of $70 par value common stock of Mintor
Corporation at $78 per share, plus brokerage fees of $480.
30 Received a cash dividend of $1.15 per share on HAL Corp. common
Feb. 8 Received cash dividends of $0.40 per share on Renda Corp. preferred
18 Sold all 800 shares of Renda Corp. preferred stock at $30.00 per share
less brokerage fees of $360.
July 30 Received a cash dividend of $1.00 per share on HAL Corp. common
Sept. 6 Purchased an additional 800 shares of $10 par value common stock of
Mintor Corporation at $82 per share, plus brokerage fees of $800.
Dec. 1 Received a cash dividend of $1.50 per share on Mintor Corporation
At December 31, 2003, the fair values of the securities were:
Hi-Tech Company uses separate account titles for each investment, such as "Investment in HAL
Corporation Common Stock."
(a) Prepare journal entries to record the transactions.
(b) Post to the investment accounts. (Use T accounts.)
(c) Prepare the adjusting entry at December 31, 2003, to report the portfolio at fair value.
(d) Show the balance sheet presentation at December 31, 2003.
The solution explains the journal entries to be made for various stock transactions.
Description of Stock Transactions
On January 1, Armada Corporation had 95,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $5 per share. During the year, the following occurred
Apr 1 Issued 15,000 additional shares of common stock for $17 per share.
June 15 Declared a cash dividend of $ 1 per share to stockholders of record on June 30.
July 10 Paid the $ 1 cash dividend.
Dec 1 Issued 2,000 additional shares of common stock for $19 per share.
15 Declared a cash dividend on outstanding shares of $1.20 per share to stockholders of record on December 31.
(a) Prepare the entries if any on each of the three dividend dates.
(b) How are dividends and dividend payable reported in the financial statement prepared at December 31?
Amez Corporation was organized on January 1, 2004. During its first year, the corporation issued 2,000 shares of $50 par value preferred stock and 100,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends : 2004- $6,000, 205 - $12,000 and 2006- $28,000.
(a) Show the allocation of dividends to each class of stock assuming the preferred stock dividend is 8% and not cumulative.
(b) Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 9 % and cumulative.
(c) Journalize the declaration of the cash dividend at December 31, 2006 under part B.
The following information is available for Sosa Corporation for the year ended December 31, 2005: Sales $800,000; other revenue and gains $92,000; operating expenses $110,000; cost of goods sold $265.000; other expenses and losses $28,000; Preferred stock dividends %30,000. The company's tax rate was 20% and it had 50,000 shares outstanding during the entire year.
(a) Prepare a corporate income statement.
(b) Calculate earnings per share.
On January 1, 2005 Snider Corporation had the following stockholders equity accounts
Common Stock ($10 per value , 90,000 shares issued and outstanding) $900,000
Paid -in Capital in Excess of Par Value 200,000
Retained Earnings 540,000
During the year the following transaction occurred:
Jan 15 Declared a $1 cash dividend per share to stockholders of record on January 31, payable February 15.
Feb 15 Paid the dividend declared in January.
Apr. 15 Declared a 10% stock dividend to stockholders of record on April 30, distributable May 15. On April 15 the market price of the stock was $15 per share.
May 15 Issued the shares for the stock dividend.
July 1 Announced a 2 for 1 stock split. The market price per share prior to the announcement was $17 ( the new par value is $5)
Dec 1 Declared a $0.50 per share cash dividend to stockholders of record on December 15, payable January 10, 2006
31. Determined that net income for the year was $250,000
(a) Journalize the transactions and the closing entry for net income.
(b) Enter the beginning balances and post the entries to the stockholders equity accounts.
(c) Prepare a stockholders equity section of December 31.
The stockholders equity accounts of Tracey Inc at January 1, 2005 are as follows
Preferred Stock $100 par 7% $5000,000
Current Stock $10 par 900,0000
Paid-in capital in Excess of par value
( Preferred Stock ) 100,000
Paid -in capital in Excess of Par value
(Common Stock) 200,000
Retained Earnings 500,000
There were no dividends in arrears on preferred stock. During 2005, the company had the following transactions and events:
July 1 Declared a $0.50 cash dividend on common stock.
Aug 1 Discovered a $72,000 overstatement of 2004 depreciation. Ignore income taxes.
Sept 1 Paid the cash dividend declared on July 1.
Dec 1 Declared a 10% stock dividend on common stock when the market value of the stock was $16 per share.
Dec 15 Declared a &% cash dividend on preferred stock payable January 31, 2006
Dec 31 Determined that net income for the year was $380,000.
(a) Journalize the transactions and the closing entry for the net income
(b) Enter the beginning balances in the accounts and post to the stockholders equity accounts.
(c) Prepare a retained earning statement for the year.
(d) Prepare a stockholders equity section at December 31, 2005.