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chapter 11- answers to book

chapter 11- answers to book - Chapter 11 Corporations...

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Chapter 11 Corporations: Paid-in Capital and the Balance Sheet Short Exercises (5 min.) S 11-1 1. C. Stockholders have limited liability (5 min.) S 11-2 Req. 1 The two primary sources of stockholders’ equity are paid-in capital and retained earnings . Req. 2 Retained earnings are considered to be internally generated. Chapter 11 Corporations: Paid-in Capital and the Balance Sheet 17
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(5 min.) S 11-3 Journal ACCOUNTS AND EXPLANATIONS POST . REF. DEBIT CREDIT a. Cash (1,000 × $9) 9,000 Common Stock (1,000 × $3) 3,000 Paid-in Capital in Excess of Par 6,000 b. Cash 30,000 Preferred Stock (1,000 × $30) 30,000 (5 min.) S 11-4 The excess is not a profit and therefore has no effect on net income . The $31,968,000 is paid-in capital in excess of par . (5-10 min.) S 11-5 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT Cash 7,950 Common Stock 4,000 Paid-in Capital in Excess of Par 3,950 Issued stock. Financial and Managerial Accounting 2/e Solutions Manual 18
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(5 min.) S 11-6 Stockholders’ equity: Paid-in capital: Common stock, $2 par, 40,000 shares issued ..... $80,000 Paid-in capital in excess of par ...................... ……… 16,800 Total paid-in capital .......................... ……………… 96,800 Retained earnings .............................. ……………… ....... 17,000 Total stockholders’ equity ........................ ……………... $113,800 (10 min.) S 11-7 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT Dec 31 Sales revenue 100,000 Interest revenue 1,200 Income summary 101,200 Close the revenue accounts. Dec 31 Income summary 103,500 Cost of goods sold 58,500 Operating expenses 45,000 Close the expense accounts. Dec 31 Retaining earnings 2,300 Income summary 2,300 Close the income summary. Dec 31 Retained earnings 10,000 Dividends 10,000 Close the dividends account. Chapter 11 Corporations: Paid-in Capital and the Balance Sheet 19
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(10 min.) S 11-8 Journal DATE ACCOUNTS AND EXPLANATIONS POST . REF. DEBIT CREDIT 2010 1a. Dec. 15 Retained Earnings ($110,000 × .02) + (65,000 × $1) 67,200 Dividends Payable 67,200 Declared a cash dividend. 2011 1b. Jan. 4 Dividends Payable 67,200 Cash 67,200 Paid the cash dividend. (5-10 min.) S 11-9 1. Preferred stock is cumulative because it is not specifically designated as noncumulative . 2. Preferred dividend is $3,900 ($65,000 × .06). Common dividend is $11,100 ($15,000 $3,900) 3. Preferred dividends: 2011 dividend in arrears ($65,000 × .06)………… $3,900 2012 dividend in arrears……………………………. 3,900 2013 current-year dividend………………………… 3,900 Total…………………………………………………….. $11,700 Common dividends ($25,000 $11,700)……………. $13,300 Financial and Managerial Accounting 2/e Solutions Manual 20
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(5-10 min.) S 11-10 Preferred equity: Par value………………………………………………... $ 45,500 Cumulative dividends ($45,500 × .07 × 5) ...... ……. 15,925 Stockholders’ equity allocated to preferred……... $ 61,425 Book value per share ($61,425 / 3,500 shares)………………………. $ 17.55 Common equity: Total stockholders’ equity ................. ……………… $1,050,50 0 Less: preferred equity ……………………………… (61,425 ) Common equity..…………………………… ............... $989,075 Book value per share ($989,075 / 1,400,000 shares)………………………. $ 0.71 (5-10 min.) S 11-11 Rate of return on total assets = Net Interest income + expense = $4,845 + $198 Average total assets ($31,328 + $27,352) / 2 = $5,043 = 17.2% $29,340 Rate of return = Net Preferred = on common income dividends $4,845 $ 0
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