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Journalize transactions for treasury stock

1. Walton Corporation has the following stockholders' equity accounts
on January 1, 2005:
Common Stock, $10 par value ..................... $1,500,000
Paid-in Capital in Excess of Par ................ 200,000
Retained Earnings ............................... 500,000
??????????
Total Stockholders' Equity .................... $2,200,000

The company uses the cost method to account for treasury stock
transactions. During 2005, the following treasury stock
transactions occurred:

April 1 Purchased 9,000 shares at $15 per share.
August 1 Sold 3,000 shares at $18 per share.
October 1 Sold 3,000 shares at $13 per share.

INSTRUCTIONS
(a) Journalize the treasury stock transactions for 2005.
(b) Prepare the Stockholders' Equity section of the balance sheet
for Walton Corporation at December 31, 2005. Assume net income
was $110,000 for 2005.

2. The following items were shown on the balance sheet of Herman
Corporation on December 31, 2005:

Stockholders' Equity
Paid-In Capital
Capital Stock
Common stock, $5 par value, 240,000 shares
authorized; ______ shares issued and ______
outstanding .................................. $1,100,000

Additional paid-in capital
In excess of par value ......................... 110,000
??????????
Total paid-in capital ........................ 1,210,000

Retained Earnings .................................. 500,000
??????????
Total paid-in capital and retained earnings .. 1,710,000
Less: Treasury stock (10,000 shares) .............. (110,000)
??????????
Total stockholders' equity ................... $1,600,000

INSTRUCTIONS
Complete the following statements and show your computations.

(a) The number of shares of common stock issued was _______________.

(b) The number of shares of common stock outstanding was __________.

(c) The sales price of the common stock when issued was $__________.

(d) The cost per share of the treasury stock was $_____________.

(e) The average issue price of the common stock was $______________.

(f) Assuming that 25% of the treasury stock is sold at $20 per
share, the balance in the Treasury Stock account would be
$______________.

3. Jenner Corporation's stockholders' equity section at December 31,
2004 appears below:

Stockholders' equity
Paid-in capital
Common stock, $10 par, 60,000 outstanding $600,000
Paid-in capital in excess of par 150,000
????????
Total paid-in capital $750,000
Retained earnings 150,000
????????
Total stockholders' equity $900,000

On June 30, 2005, the board of directors of Jenner Corporation
declared a 10% stock dividend, payable on July 31, 2005, to
stockholders of record on July 15, 2005. The fair market value of
Jenner Corporation's stock on June 30, 2005, was $15.

On December 1, 2005, the board of directors declared a 2 for 1 stock
split effective December 15, 2005. Jenner Corporation's stock was
selling for $20 on December 1, 2005, before the stock split was
declared. Par value of the stock was adjusted. Net income for 2005
was $190,000 and there were no cash dividends declared.

INSTRUCTIONS
(a) Prepare the journal entries on the appropriate dates to record
the stock dividend and the stock split.
(b) Fill in the amount that would appear in the stockholders' equity
section for Jenner Corporation at December 31, 2005, for the
following items:

1. Common stock $____________

2. Number of shares outstanding ____________

3. Par value per share $____________

4. Paid-in capital in excess of par $____________

5. Retained earnings $____________

6. Total stockholders' equity $____________

4. United Health is considering two alternatives for the financing of
some high technology medical equipment. These two alternatives are:

1. Issue 50,000 shares of $10 par value common stock at $50 per
share.
2. Issue $2,500,000, 10%, 10-year bonds at par.

It is estimated that the company will earn $900,000 before interest
and taxes as a result of acquiring the medical equipment. The
company has an estimated tax rate of 30% and has 100,000 shares of
common stock outstanding prior to the new financing.

INSTRUCTIONS
Determine the effect on net income and earnings per share for these
two methods of financing.

5. The following transactions were made by Waite Company. Assume all
investments are short-term and are readily marketable.

June 2 Purchased 200 shares of Abel Corporation common stock
for $45 per share.

July 1 Purchased 200 Lynn Corporation bonds for $220,000.

30 Received a cash dividend of $2 per share from Abel
Corporation.

Sept. 15 Sold 60 shares of Abel Corporation stock for $50 per
share.

Dec. 31 Received semiannual interest check for $11,000 from Lynn
Corporation.

31 Received a cash dividend of $2 per share from Abel
Corporation.

INSTRUCTIONS
Journalize the transactions.

6. Stine Corporation's balance sheet at December 31, 2004, showed the
following:

Short-term investments, at fair value $46,500

Stine Corporation's trading portfolio of stock investments consisted
of the following at December 31, 2004:

Stock Number of Shares Cost
????????????????????? ???????????????? ???????
Craft Common Stock 200 $30,000
Boone Preferred Stock 400 6,000
Hale Common Stock 300 9,000
???????
$45,000

During 2005, the following transactions took place:

Feb. 5 Sold 50 shares of Craft common stock for $9,000.
Mar. 30 Purchased 25 shares of Hale common stock for $950.
Sept. 9 Purchased 75 shares of Hale common stock for $2,000.

At year end on December 31, 2005, the market values per share were:

Market Value Per Share
??????????????????????
Craft Common Stock $148.00
Boone Preferred Stock $ 14.00
Hale Common Stock $ 25.00

INSTRUCTIONS
(a) Prepare the journal entries to record the 2005 stock
transactions.
(b) On December 31, 2005, prepare any adjusting entry that might be
necessary relative to the trading portfolio.
(c) Show how the stock investments will appear on Stine
Corporation's balance sheet at December 31, 2005.

7. Pierce Company reported net income of $250,000 for the current year.
Depreciation recorded on buildings and equipment amounted to $80,000
for the year. Balances of the current asset and current liability
accounts at the beginning and end of the year are as follows:

End of Beginning of
Year Year
??????? ????????????
Cash $20,000 $15,000
Accounts receivable 19,000 32,000
Inventories 50,000 65,000
Prepaid expenses 7,500 5,000
Accounts payable 12,000 18,000
Income taxes payable 1,600 1,200

INSTRUCTIONS
Prepare the cash flows from the operating activities section of the
statement of cash flows using the indirect method.

8. The comparative balance sheets for Kohl Company appear below:

KOHL COMPANY
Comparative Balance Sheet

Dec. 31, Dec. 31,
2005 2004
???????? ????????
Assets
??????
Cash $ 23,000 $12,000
Accounts receivable 18,000 14,000
Prepaid expenses 6,000 9,000
Inventory 27,000 18,000
Long-term investments -0- 18,000
Equipment 60,000 30,000
Accumulated depreciation??equipment (18,000) (14,000)
???????? ???????
Total assets $116,000 $87,000

Liabilities and Stockholders' Equity
????????????????????????????????????

Accounts payable $ 21,000 $ 9,000
Bonds payable 37,000 45,000
Common stock 40,000 23,000
Retained earnings 18,000 10,000
???????? ???????
Total liabilities and stockholders' equity $116,000 $87,000

Additional information:
??????????????????????
1. Net income for the year ending December 31, 2005 was $20,000.
2. Cash dividends of $12,000 were declared and paid during the year.
3. Long-term investments that had a cost of $18,000 were sold for
$16,000.
4. Sales for 2005 were $120,000.

INSTRUCTIONS
Prepare a statement of cash flows for the year ended December 31,
2005, using the indirect method.

9. The comparative balance sheet of Ferry Company appears below:

FERRY COMPANY
Comparative Balance Sheet
December 31,
????????????????????????????????????????????????????????????????????
Assets 2005 2004
?????? ?????? ??????
Current assets ......................... $ 322 $280
Plant assets ........................... 678 520
?????? ????
Total assets ......................... $1,000 $800

Liabilities and stockholders' equity
????????????????????????????????????
Current liabilities .................... $ 180 $120
Long-term debt ......................... 240 160
Common stock ........................... 320 320
Retained earnings ...................... 260 200
?????? ????
Total liabilities and
stockholders' equity ................. $1,000 $800

INSTRUCTIONS
(a) Using horizontal analysis, show the percentage change for each
balance sheet item using 2004 as a base year.
(b) Using vertical analysis, prepare a common size comparative
balance sheet.

10. Operating data for Manning Corporation are presented below.

2005
????????
Net sales $500,000
Cost of goods sold 320,000
Operating expenses 120,000
Net income 60,000

INSTRUCTIONS
Prepare a schedule showing a vertical analysis for 2005.

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Solution Summary

Journalize transactions for treasury stock for Walton Corporation is examined.

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