CHAPTER 14 - CHAPTER14 OrganizationandCorporations:...

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CHAPTER 14Organization andCorporations:Capital Stock TransactionsSOLUTIONS TO BRIEF EXERCISESBRIEF EXERCISE 14-1The advantages and disadvantages of a corporation are asfollows:AdvantagesDisadvantagesSeparate legal existenceLimited liability ofstockholdersTransferable ownershiprightsAbility to acquire capitalContinuous lifeCorporation management—professional managementCorporation managementand managementseparation of ownershipGovernment regulationsAdditional taxesBRIEF EXERCISE 14-2Dec. 31Income Summary...........................................450,000Retained Earnings..................................450,000BRIEF EXERCISE 14-3May 10Cash (1,000 X $18)..........................................18,000
Common Stock (1,000 X $10)................10,000Paid-in Capital in Excess of ParValue (1,000 X$8)................................8,000BRIEF EXERCISE 14-4June1Cash (3,000 X $7)............................................21,000Common Stock (3,000 X $1)..................3,000Paid-in Capital in Excess of StatedValue (3,000 X$6)................................18,000
BRIEF EXERCISE 14-5Land (5,000 X $16)............................................................80,000Common Stock (5,000 X $10)..................................50,000Paid-in Capital in Excess of Par Value...................30,000(5,000 X $6)BRIEF EXERCISE 14-6July1Treasury Stock (500 X $9)..............................4,500Cash..........................................................4,500Sept. 1Cash (300 X $11)..............................................3,300Treasury Stock (300 X $9).......................2,700Paid-in Capital from TreasuryStock (300 X $2)...................................600BRIEF EXERCISE 14-7Cash (5,000 X $120)..........................................................600,000Preferred Stock (5,000 X $100)................................500,000Paid-in Capital in Excess of Par Value—Preferred Stock (5,000 X $20)..............................100,000BRIEF EXERCISE 14-8Stockholders’ equityPaid-in capitalCapital stock
Common stock, $10 par value, 5,000 sharesissued and 4,500shares outstanding$50,000Additional paid-in capitalIn excess of par value—common stock10,000Total paid-in capital60,000Retained earnings45,000Total paid-in capital and retained earnings105,000Less:Treasury stock—common (500 shares)( 11,000)Total stockholders’ equity$94,000
BRIEF EXERCISE 14-9Book value per share = $20.25, or ($810,000 ÷ 40,000).
SOLUTIONS TO EXERCISESEXERCISE 14-1(a)Jan. 10Cash (70,000 X $5)..................................350,000Common Stock................................350,000July1Cash (40,000 X $8)..................................320,000Common Stock (40,000 X $5).........200,000Paid-in Capital in Excess ofPar Value(40,000 X $3)...............120,000(b)Jan. 10Cash (70,000 X $5)..................................350,000Common Stock (70,000 X $1).........70,000Paid-in Capital in Excess ofStated Value(70,000 X $4)..........280,000July1Cash (40,000 X $8)..................................320,000Common Stock (40,000 X $1).........40,000Paid-in Capital in Excess ofStated Value(40,000 X $7)..........280,000EXERCISE 14-2Mar.2Organization Expense..................................30,000Common Stock (5,000 X $1).................5,000Paid-in Capital in Excess of ParValue—CommonStock.....................25,000
June 12Cash................................................................375,000Common Stock (60,000 X $1)...............60,000Paid-in Capital in Excess of ParValue—CommonStock.....................315,000July11Cash (1,000 X $110).......................................110,000Preferred Stock (1,000 X $100).............100,000Paid-in Capital in Excess of ParValue—PreferredStock.....................10,000(1,000 X $10)
EXERCISE 14-2 (Continued)Nov. 28Treasury Stock...............................................80,000Cash.........................................................80,000EXERCISE 14-3(1)Land...........................................................................110,000Common Stock (5,000 X $20)..........................100,000Paid-in Capital in Excess of Par Value...........10,000(2)Land (20,000 X $11)..................................................220,000Common Stock (20,000 X $10)........................200,000Paid-in Capital in Excess of Par Value...........20,000(20,000 X $1)EXERCISE 14-4(a)Mar.1Treasury Stock (50,000 X $16)...............800,000Cash..................................................800,000July1Cash (10,000 X $17).................................170,000Treasury Stock (10,000 X $16)........160,000Paid-in Capital from TreasuryStock (10,000X $1)......................10,000Sept. 1Cash (8,000 X $15)...................................120,000Paid-in Capital from TreasuryStock (8,000 X$1)................................8,000
Treasury Stock (8,000 X $16)..........128,000(b)Sept. 1Cash (8,000 X $13)...................................104,000Paid-in Capital from TreasuryStock.....................................................10,000Retained Earnings...................................14,000Treasury Stock (8,000 X $16)..........128,000
EXERCISE 14-5(a)Feb. 1Cash (20,000 X $51)............................1,020,000Preferred Stock...........................

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Term
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AhmedMokhtar

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