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    Financial Accounting Problems on Journal Entries

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    E3-4-On Jan 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 $13 per share.
    Sept 1 Sold 8,00 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 Corp 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 12000 shares of $5 par value
    common stock at $12 per share
    May 10 Cash 600,000
    Capital stock 600,000
    (issued at 10,000 shares of $50 par value
    preferred stock at $60 per share)
    May 15 Capital Stock 14,000
    Cash 14,000
    (Purchased 1,000 shares of common
    stock for the treasury at $14 per share)
    May 31 Cash 7,500
    Capital stock 2,500
    Gain on Sale of Stock 5,000
    (Sold 500 shares o 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 Oct. 31, the stockholder's equity section of the Hinckley Company consists of common stock $800,000 and retained earnings $400,000. Hinckley is considering the folowwing two courses of action, 1-Declare 10% stock dividend on the 80,000, $10 par value shares outstanding, or 2-effect a 2 for 1 stock split that will reduce par value to $5 per share. The current market price is $15 per share.
    Instructions-Prepare a tabular summary of the effects of the alternative actions on the components of stockholders' equity, outstanding shares, and book value per share. Use the following column headings, Before Action, After Stock Dividend, and After Stock Split.

    E3-22-
    1-Roscoe Cosmetics aquired 10% of the 200,000 shares of common stock of Ling Fashion at a total cost of $13 per share on Mar 18,2002. On june 30, Ling declared and paid a $75,000 dividend. On Dec 31, Ling reported net income of $122,000 for the year. At Dec 31, the market price of Ling Fashion was $14 per share. The stock is classified as available for sale.
    2-Juan Inc., obtained significant influence over Orlando Corp. by buying 30% of Orlando's 30,000 outstanding shares of common stock at a total cost of $9 per share on Jan 1,2002. On June 15, Orlando declared and paid a cash dividend of $35,000. On dec 31, Orlando reported a net income of $80,000 for the year.
    Prepare all necessary journal entries for 2002 for (a)Roscoe Cosmetics and (b)Juan Inc.

    E3-23-At Dec 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
    $53,000 $49,000
    a) Prepare the adjusting entry at Dec 31, 2002, to report the securities at fair value.
    b) Show the balance sheet and income statement presentation at Dec 31,2002, after adjustment to fair value.

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    Solution Summary

    The solution is presented in a well-formatted excel sheet. Problems deal with journalizing transactions relating to Stockholders' Equity.

    $2.19