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

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.

Solution Preview

Check the attached sheet for format and formulas.

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 ...

Solution Summary

This solution provides a detailed, step by step calculation of the given problem.

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