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    Journal Entries for Klein's Stock; Entries for Leary's Bonds

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    26. Klein Corporation's stockholders' equity section at December 31,
    2010 appears below:

    Stockholders' equity
    Paid-in capital
    Common stock, $10 par, 50,000 outstanding $500,000
    Paid-in capital in excess of par 150,000

    Total paid-in capital $650,000
    Retained earnings 150,000

    Total stockholders' equity $800,000

    On June 30, 2011, the board of directors of Klein Corporation
    declared a 15% stock dividend, payable on July 31, 2011, to
    stockholders of record on July 15, 2011. The fair market value of
    Klein Corporation's stock on June 30, 2011, was $12.

    On December 1, 2011, the board of directors declared a 2 for 1 stock
    split effective December 15, 2011. Klein Corporation's stock was
    selling for $20 on December 1, 2011, before the stock split was
    declared. Par value of the stock was adjusted. Net income for 2011
    was $240,000 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 Klein Corporation at December 31, 2011, 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 $____________

    27. On January 1, 2011, Leary Corporation issued $800,000, 9%, 5-year
    bonds dated January 1, 2011, at 96. The bonds pay semiannual
    interest on January 1 and July 1. The company uses the
    straight-line method of amortization and has a calendar year end.

    INSTRUCTIONS

    Prepare all the journal entries that Leary Corporation would make
    related to this bond issue through January 1, 2012. Be sure to
    indicate the date on which the entries would be made.

    28. Boyle Corporation had the following comparative current assets and
    current liabilities:

    Dec. 31, 2011 Dec. 31, 2010

    Current assets
    Cash $ 60,000 $ 30,000
    Marketable securities 40,000 10,000
    Accounts receivable 55,000 95,000
    Inventory 110,000 90,000
    Prepaid expenses 35,000 20,000

    Total current assets $300,000 $245,000
    Current liabilities
    Accounts payable $140,000 $110,000
    Salaries payable 40,000 30,000
    Income tax payable 20,000 15,000

    Total current liabilities $200,000 $155,000

    During 2011, credit sales and cost of goods sold were $750,000 and
    $400,000, respectively.

    INSTRUCTIONS

    Compute the following liquidity measures for 2011:
    1. Current ratio.
    2. Working capital.
    3. Acid-test ratio.
    4. Receivables turnover.
    5. Inventory turnover.

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    Solution Preview

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    Solution 26 Klein Corporation

    (a) Journal Entries

    Date Description Debit Credit
    7/31/2011 Retained Earnings 90000
    Common Stock 75000
    Paid in Capital in excess of par 15000

    12/15/2011 Common Stock $10 par 575000
    Common Stock $5 par 575000
    (stock split ...

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