Chap008 - Accounting for and Presentation of Owners’...

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Unformatted text preview: Accounting for and Presentation of Owners’ Equity SOLUTIONS: E8-1. OE A = L + PIC + RE Beginning........... $ (4) $ (3) (1) (2) $520,000 OE Changes.............. +260,000 +21,000 +40,000 + (7) Net income- 55,000 Dividends Ending................ (5) = $234,000 + $175,000 + (6) Steps: Short-cut approach: 1. $175,000 - $40,000 = $135,000 $260,000 = + $21,000 + $40,000 2. $520,000 - $135,000 = $385,000 + Net income - $55,000 3. $234,000 - $21,000 = $213,000 4. $213,000 + $520,000 = $733,000 Net income = $254,000 5. $733,000 + $260,000 = $993,000 6. $993,000 - $234,000 - $175,000 = $584,000 7. $385,000 + Net income - $55,000 = $584,000 Net income = $254,000 E8-2. OE A = L + PIC + RE Beginning........... $ (5) $219,000 (4) (6) Changes.............. +77,000 - 36,000 +10,000 + (7) Net income- 62,000 Dividends Ending................ (3) = (2) + $190,000 + (1) $379,000 OE Steps: Short-cut approach: 1. $379,000 - $190,000 = $189,000 $77,000 = - $36,000 + $10,000 2. $219,000 - $36,000 = $183,000 + Net income - $62,000 3. $183,000 + $379,000 = $562,000 4. $190,000 - $10,000 = $180,000 Net income = $165,000 5. $562,000 - $77,000 = $485,000 6. $485,000 - $219,000 - $180,000 = $86,000 7. $86,000 + Net income - $62,000 = $189,000 Net income = $165,000 E8-3. Retained earnings, December 31, 2001.......................................................... $346,400 Add: Net income for the year.......................................................................... 56,900 Less: Dividends for the year............................................................................ (32,500) Retained earnings, December 31, 2002........................................................... $370,800 E8-4. Prepare the retained earnings portion of a statement of changes in owners’ equity for the year ended December 31, 2002: Chapter 8 Retained earnings, December 31, 2003........................................................... $ ? Less: Net loss for the year.............................................................................. (11,500) Less: Dividends for the year............................................................................ (16,800) Retained earnings, December 31, 2003........................................................... $122,600 Solving for the unknown amount, retained earnings at December 31, 2002 was $150,900. E8-5. a. Balance sheet amount equals number of shares issued * par value. 1,400,000 shares * $5 = $7,000,000 b. Cash dividends are paid on shares outstanding. 1,250,000 shares * $0.15 = $187,500 c. Treasury stock accounts for the difference between shares issued and shares outstanding. E8-6. a. Average price at which shares issued = Balance sheet amount / Number of shares issued = $2,600,000 / 800,000 = $3.25 per share b. Common stock at stated value of $1.00 per share; 4,000,000 shares authorized, 800,000 issued and 720,000 shares outstanding..................................................................... $ 800,000 Additional paid-in capital........................................................................... Additional paid-in capital....
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This note was uploaded on 04/04/2009 for the course ACC ACC/539 taught by Professor Michaeldonohoe during the Fall '05 term at University of Phoenix.

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Chap008 - Accounting for and Presentation of Owners’...

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