b. How does the total equity of 2,550 shares com- pare with the total equity of 2,500 shares before
the stock dividend? 5. a. Where should a declared but unpaid cash divi-
dend be reported on the balance sheet? b.
Where should a declared but unissued stock dividend be reported on the balance sheet?
6. A corporation reacquires 60,000 shares of its own 10 par common stock for 3,000,000, recording it at cost.
a. What effect does this transaction have on rev- enue or expense of the period?
b. What effect does it have on stockholders’ equity? 7. The treasury stock in Discussion Question 6 is re-
sold for 3,750,000. a. What is the effect on the corporation’s revenue
of the period? b. What is the effect on stockholders’ equity?
8. What are the three classifications of restrictions of retained earnings, and how are such restrictions
normally reported on the financial statements? 9. Indicate how prior period adjustments would be
reported on the financial statements presented only for the current period.
10. What is the primary purpose of a stock split?
Practice Exercises
PE 11-1A Dividends per share
OBJ. 2
Swan Creek Company has 40,000 shares of cumulative preferred 2 stock, 60 par and 50,000 shares of 50 par common stock. The following amounts were distributed as
dividends:
Year 1 30,000
Year 2 90,000
Year 3 125,000
Determine the dividends per share for preferred and common stock for each year. PE 11-1B
Dividends per share
OBJ. 2
Zero Calories Company has 16,000 shares of cumulative preferred 1 stock, 40 par and 80,000 shares of 150 par common stock. The following amounts were distributed as
dividends:
Year 1 21,600
Year 2 4,000
Year 3 100,800
Determine the dividends per share for preferred and common stock for each year. PE 11-2A
Entries for issuing stock
OBJ. 2
On May 10, Century Realty Inc. issued for cash 90,000 shares of no-par common stock with a stated value of 30 at 42. On September 3, Century Realty Inc. issued at par
value 36,000 shares of preferred 1 stock, 25 par for cash. On December 1, Century Realty Inc. issued for cash 14,000 shares of preferred 1 stock, 25 par at 33.
Journalize the entries to record the May 10, September 3, and December 1 transactions. PE 11-2B
Entries for issuing stock
OBJ. 2
On January 22, Zentric Corporation issued for cash 180,000 shares of no-par common stock at 4. On February 14, Zentric Corporation issued at par value 44,000 shares of
EE 11-1 p. 502
EE 11-1 p. 502
EE 11-2 p. 505
EE 11-2 p. 505
Example Exercises
522
Chapter 11 Corporations: Organization, Stock Transactions, and Dividends
Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook andor eChapters. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 11 Corporations: Organization, Stock Transactions, and Dividends
523
preferred 2 stock, 55 par for cash. On August 30, Zentric Corporation issued for cash 9,000 shares of preferred 2 stock, 55 par at 60.
Journalize the entries to record the January 22, February 14, and August 30 transactions. PE 11-3A
Entries for cash dividends
OBJ. 3
The declaration, record, and payment dates in connection with a cash dividend of 1,250,000 on a corporation’s common stock are August 1, October 15, and November
14. Journalize the entries required on each date.
PE 11-3B Entries for cash dividends
OBJ. 3
The declaration, record, and payment dates in connection with a cash dividend of 480,000 on a corporation’s common stock are February 1, March 18, and May 1. Journalize the
entries required on each date.
PE 11-4A
Entries for stock dividends
OBJ. 3
Olde Wine Corporation has 250,000 shares of 40 par common stock outstanding. On February 15, Olde Wine Corporation declared a 2 stock dividend to be issued May 2
to stockholders of record on March 27. The market price of the stock was 52 per share on February 15.
Journalize the entries required on February 15, March 27, and May 2. PE 11-4B
Entries for stock dividends
OBJ. 3
Antique Buggy Corporation has 820,000 shares of 35 par common stock outstanding. On June 8, Antique Buggy Corporation declared a 5 stock dividend to be issued August 12
to stockholders of record on July 13. The market price of the stock was 63 per share on June 8.
Journalize the entries required on June 8, July 13, and August 12. PE 11-5A
Entries for treasury stock
OBJ. 4
On January 31, Wilderness Resorts Inc. reacquired 22,500 shares of its common stock at 31 per share. On April 20, Wilderness Resorts sold 12,800 of the reacquired shares at 40
per share. On October 4, Wilderness Resorts sold the remaining shares at 28 per share. Journalize the transactions of January 31, April 20, and October 4.
PE 11-5B
Entries for treasury stock
OBJ. 4
On May 27, Hydro Clothing Inc. reacquired 75,000 shares of its common stock at 8 per share. On August 3, Hydro Clothing sold 54,000 of the reacquired shares at 11 per share.
On November 14, Hydro Clothing sold the remaining shares at 7 per share. Journalize the transactions of May 27, August 3, and November 14.
PE 11-6A
Reporting stockholders’ equity
OBJ. 5
Using the following accounts and balances, prepare the Stockholders’ Equity section of the balance sheet. Two hundred fifty thousand shares of common stock are authorized,
and 17,500 shares have been reacquired.
Common Stock, 60 par 12,000,0000
Paid-In Capital from Sale of Treasury Stock 320,000
Paid-In Capital in Excess of Par—Common Stock 3,200,000
Retained Earnings 18,500,000
Treasury Stock 1,137,500
EE 11-3 p. 507
EE 11-3 p. 507
EE 11-4 p. 508
EE 11-4 p. 508
EE 11-5 p. 510
EE 11-5 p. 510
EE 11-6 p. 511
Example Exercises
Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook andor eChapters. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
524
Chapter 11 Corporations: Organization, Stock Transactions, and Dividends
