Week_5_homework

Week_5_homework - EXERCISE 15-13(10–15 minutes(a No...

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Unformatted text preview: EXERCISE 15-13 (10–15 minutes) (a) No entry—simply a memorandum note indicating the number of shares has increased to 10 million and par value has been reduced from $10 to $5 per share. (b) Retained Earnings ($10 X 5,000,000)............... 50,000,00 Common Stock Dividend Distributable.......... 50,000,00 Common Stock Dividend Distributable........... 50,000,00 Common Stock 50,000,00 (c) Stock dividends and splits serve the same function with regard to the securities markets. Both techniques allow the board of directors to increase the quantity of shares and reduce share prices into a desired “trading range.” For accounting purposes the 20%–25% rule reasonably views large stock dividends as substantive stock splits. In this case, it is necessary to capitalize par value with a stock dividend because the number of shares is increased and the par value remains the same. Earnings are capitalized for purely procedural reasons. EXERCISE 15-15 (10–15 minutes) (a) Retained Earnings............................................... 117,000 Common Stock Dividend Distributable........ 30,000 Paid-in Capital in Excess of Par.................... 87,000 (60,000 shares X 5% X $39 = $117,000) Common Stock Dividend Distributable............. 30,000 Common Stock................................................ 30,000 (b) No entry, memorandum note to indicate that par value is reduced to $2 and shares outstanding are now 300,000 (60,000 X 5). (c) January 5, 2011 Investments (Bonds)............................................ 35,000 Gain on Appreciation of Investments (Bonds).......................................................... 35,000 Retained Earnings............................................... 125,000 Property Dividends Payable.......................... 125,000 January 25, 2011 Property Dividends Payable............................... 125,000 Investments (Bonds)....................................... 125,000 EXERCISE 15-17 (20–25 minutes) Teller Corporation Stockholders’ Equity December 31, 2010 Capital stock Preferred stock, $4 cumulative, par value $50 per share; authorized 60,000 shares, issued and outstanding 10,000 shares................................. $ 500,000 Common stock, par value $1 per share; authorized 600,000 shares, issued 200,000 shares, and outstanding 190,000 shares.................. 200,000 Total capital stock.............................................. 700,000 Additional paid-in capital— In excess of par value................................................... 1,000,000 From sale of treasury stock......................................... 160,000 Total paid-in capital........................................... 1,860,000 Retained earnings..................................................................... 201,000 Total paid-in capital and retained earnings........................... 2,061,000 Less: Treasury stock, 10,000 shares at cost........................... 170,000 Total stockholders’ equity...........................................Total stockholders’ equity....
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Week_5_homework - EXERCISE 15-13(10–15 minutes(a No...

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