Chapter_13_Solutions_7e

Chapter_13_Solutions_7e - Chapter 13 Corporations: Paid-in...

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Unformatted text preview: Chapter 13 Corporations: Paid-in Capital and the Balance Sheet Quick Check Answers: 1. c 3. a 5. d 7. b 9. c 2. a 4. a 6. c 8. d 10. b Explanations: 5. d. Debit Cash for $100,000 (100,000 shares $1). Credit Common Stock for $5,000 (100,000 shares $.05 par value). Credit Paid-in Capital in Excess of Par for $95,000, the premium account. 7. b. Common gets dividends of $40,000 after preferred gets total dividends of $10,000 ($5,000 for 2008 and $5,000 for 2009). The annual preferred dividend is $5,000 (10,000 shares $10 par .05). Chapter 13 Corporations: Paid-in Capital and the Balance Sheet 53 8. d. Total stockholders equity is $180,000, computed as follows: Common stock, $1 par, 10,000 shares issued.. $ 10,000 Paid-in capital in excess of par [10,000 shares ($10 $1)].. 90,000 Retained earnings 80,000 Total stockholders equity. $180,000 9. c. Return on assets is 10%, computed as follows: Net income + Interest expense = $22,000 + $8,000 = .10 Average total assets $300,000 Accounting 7/e Solutions Manual 54 Short Exercises (5 min.) S 13-1 1. The chairperson of the board of directors is usually the most powerful person in a corporation. 2. The stockholders hold ultimate power in a corporation. 3. The president is in charge of day-to-day operations. 4. The vice-president of accounting and finance is in charge of accounting. (5 min.) S 13-2 DIFFERENCE: A proprietorship balance sheet reports a single capital account, such as Joe Hopper, Capital. A corporation balance sheet reports stockholders equity by source. There are two sources: paid-in capital and retained earnings. SIMILARITY: A proprietorship balance sheet and a corporation balance sheet both report assets and liabilities the same way. Chapter 13 Corporations: Paid-in Capital and the Balance Sheet 55 (5 min.) S 13-3 Journal ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT a. Cash (1,000 $10) 10,000 Common Stock (1,000 $1) 1,000 Paid-in Capital in Excess of Par 9,000 b. Cash 20,000 Preferred Stock (1,000 $20) 20,000 (5 min.) S 13-4 1. The $31,968,000 is paid-in capital in excess of par. It is not a profit and therefore has no effect on net income. (5-10 min.) S 13-5 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT Cash 4,600 Common Stock 750 Paid-in Capital in Excess of Par 3,850 Issued stock. Accounting 7/e Solutions Manual 56 (5 min.) S 13-6 Stockholders equity: Paid-in capital: Common stock, $1 par, 40,000 shares issued..... $40,000 Paid-in capital in excess of par...................... 17,000 Total paid-in capital.......................... 57,000 Retained earnings..................................... 16,000 Total stockholders equity........................... $73,000 (5 min.) S 13-7 a. Accounts payable................................. $ 6,000 Unearned revenue.............................Unearned revenue....
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This note was uploaded on 05/05/2010 for the course BUSINESS 71395 taught by Professor Brown during the Spring '09 term at Miss. College.

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Chapter_13_Solutions_7e - Chapter 13 Corporations: Paid-in...

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