Resources: Ch. 11 & 12 of Financial Accounting...

Resources: Ch. 11 & 12 of Financial Accounting

Complete Exercises E11-15, E12-1, & E12-2.

Complete Problem 11-6A.

Submit as a Microsoft® Excel® or Word document.

Click the Assignment Files tab to submit your assignment.

E11-15
On October 31, the stockholders’ equity section of Omar Company consists of common
stock $600,000 and retained earnings $900,000. Omar is considering the following two
courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares
outstanding,
or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current
market price is $14 per share.
Instructions
Prepare a tabular summary of the effects of the alternative actions on the components of
stockholders’
equity and outstanding shares. Use the following column headings: Before Action,After
Stock Dividend, and After Stock Split.
E12-1 Max Weinberg is studying for an accounting test and has developed the following
questions
about investments.
1. What are three reasons why companies purchase investments in debt or stock securities?
2. Why would a corporation have excess cash that it does not need for operations?
3. What is the typical investment when investing cash for short periods of time?
4. What are the typical investments when investing cash to generate earnings?
5. Why would a company invest in securities that provide no current cash flows?
6. What is the typical stock investment when investing cash for strategic reasons?
Instructions
Provide answers for Max.
E12-2 Foren Corporation had the following transactions pertaining to debt investments.
Jan. 1 Purchased 50 8%, $1,000 Choate Co. bonds for $50,000 cash plus brokerage fees of
$900. Interest is payable semiannually on July 1 and January 1.
July 1 Received semiannual interest on Choate Co. bonds.
July 1 Sold 30 Choate Co. bonds for $34,000 less $500 brokerage fees.
Instructions
(a) Journalize the transactions.
(b) Prepare the adjusting entry for the accrual of interest at December 31.
P12-6A The following data, presented in alphabetical order, are taken from the records of
Urbina Corporation.
Accounts payable $ 240,000
Accounts receivable 140,000
Accumulated depreciation—building 180,000
Accumulated depreciation—equipment 52,000
Allowance for doubtful accounts 6,000
Bonds payable (10%, due 2019) 500,000
Buildings 950,000
Cash 42,000
Common stock ($10 par value; 500,000 shares authorized,
150,000 shares issued) 1,500,000
Dividends payable 80,000
Equipment 275,000
Goodwill 200,000
Income taxes payable 120,000
Investment in Flott common stock (10% ownership), at cost 278,000
Investment in Portico common stock (30% ownership), at equity 380,000
Land 390,000