Week 4

 

Brief Exercise 13-4

On June 1, Noonan Inc. issues 4,000 shares of no-par common stock at a cash price of $6 per share. Journalize the issuance of the shares assuming the stock has a stated value of $1 per share. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Cash = Issues shares x cash price = 4,000 x 6 = 24,000

Common Stock = Issues shares x stated value = 4,000 x 1 = 4,000

Paid-in Capital in Excess of Stated Value—Common Stock = 4,000 x 5(6-1) = 20,000

 

Account titles and explanation

Debt

Credit

Cash

24,000

 

Common Stock

 

4,000

Paid-in Capital in Excess of Stated Value—Common Stock

 

20,000

 

Brief Exercise 13-7

Garb Inc. issues 5,000 shares of $100 par value preferred stock for cash at $130 per share. Journalize the issuance of the preferred stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Cash =5,000 x 130 = 650,000

Preferred stock =5,000 x 100 = 500,000

Paid-in Capital in Excess of Par—Preferred Stock =5,000 x 30(130-100) = 150,000

Account titles and explanation

Debt

Credit

Cash

650,000

 

Common Stock

 

500,000

Paid-in Capital in Excess of Par-Preferred Stock

 

150,000

Brief Exercise 13-8

Pine Corporation has the following accounts at December 31: Common Stock, $10 par, 5,000 shares issued, $50,000; Paid-in Capital in Excess of Par—Common Stock $30,000; Retained Earnings $45,000; and Treasury Stock, 500 shares, $11,000.

 

Prepare the stockholders’ equity section of the balance sheet. (Enter the account name only and do not provide the descriptive information provided in the question.)

Common stock, $10 par value, 5,000 shares issued and 4,500 shares outstanding = 5000 x 10 = 50,000

Treasury stock (500 common shares) = 11,000

 

Pine Corporation balance sheet December 31

Stockholders’ equity

 

Paid-in Capital

 

Capital Stock

 

Common Stock

50,000

Additional Paid-in Stock

 

Paid-in Capital in Excess of Par—Common Stock

30,000

Total paid in Capital  = 50,000 + 30,000 =

80,000

Retained Earnings

4,500

Total paid in Capital and Retained Earnings = 80,000 + 45,000(4,500 x 10) =

125,000

Less

Treasury Stock

11,000?

Total Stockholders’ equity = 125,000 -11,000 =

114,000

   

 

Exercise 13-2

Andrea has prepared the following list of statements about corporations.Identify each statement as true or false.

1.      Corporation management is both an advantage and a disadvantage of a corporation compared to a proprietorship or a partnership. True

2.      Limited liability of stockholders, government regulations, and additional taxes are the major disadvantages of a corporation. False

3.      When a corporation is formed, organization costs are recorded as an asset. = False

4.      Each share of common stock gives the stockholder the ownership rights to vote at stockholder meetings, share in corporate earnings, keep the same percentage ownership when new shares of stock are issued, and share in assets upon liquidation. True

5.      The number of issued shares is always greater than or equal to the number of authorized shares. False

6.      A journal entry is required for the authorization of capital stock. False

7.      Publicly held corporations usually issue stock directly to investors. False

8.      The trading of capital stock on a securities exchange involves the transfer of already issued shares from an existing stockholder to another investor. True

9.      The market price of common stock is usually the same as its par value. False

10.  Retained earnings are the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock. False

 

                Exercise 13-4

 

Osage Corporation issued 2,000 shares of stock. Prepare the entry for the issuance under the following assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

a) The stock had a par value of $5 per share and was issued for a total of $52,000.

b) The stock had a stated value of $5 per share and was issued for a total of $52,000.

c) The stock had no par or stated value and was issued for a total of $52,000.

d) The stock had a par value of $5 per share and was issued to attorneys for services during incorporation valued at $52,000.

e) The stock had a par value of $5 per share and was issued for land worth $52,000.

 

Common Stock = 2,000 x 5 = 10,000

a)

Account titles and explanation

Debt

Credit

Cash

52,000

 

Common Stock

 

10,000

Paid-in Capital in Excess of Par-Common Stock  = 52,00 – 10,000 =

 

42,000

 

b)

Account titles and explanation

Debt

Credit

Cash

52,000

 

Common Stock

 

10,000

Paid-in Capital in Excess of Stated Value-Common Stock  = 52,00 – 10,000 =

 

42,000

 

c)

Account titles and explanation

Debt

Credit

Cash

52,000

 

Common Stock

 

52,000

 

d)

Account titles and explanation

Debt

Credit

Organization Expense

52,000

 

Common Stock

 

10,000

Paid-in Capital in Excess of Stated Value-Common Stock  = 52,00 – 10,000 =

 

42,000

 

e)

Account titles and explanation

Debt

Credit

Land

52,000

 

Common Stock

 

10,000

Paid-in Capital in Excess of Stated Value-Common Stock  = 52,00 – 10,000 =

 

42,000

 

Exercise 13-7 (Part level Submission

 

On January 1, 2014, the stockholders’ equity section of Newlin Corporation shows common stock ($5 par value) $1,500,000; paid-in capital in excess of par $1,000,000; and retained earnings $1,200,000. During the year, the following treasury stock transactions occurred.

Mar. 1 Purchased 50,000 shares for cash at $15 per share.

July. 1 Sold 10,000 treasury shares for cash at $17 per share.

Sept.1 Sold 8,000 treasury shares for cash at $14 per share.

 

a) Journalize the treasury stock transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

Mar. 1

Account titles and explanation

Debt

Credit

Treasury Stock

750,000

 

Cash

 

750,000

Treasury Stock = 50,000 ×15 =750,000

 

 

 

July. 1

Account titles and explanation

Debt

Credit

Cash

170,000

 

Treasury Stock

 

150,000

Paid-in Capital from Treasury Stock

 

20,000

 

Cash = 10,000 × 17 = 170,000

Treasury Stock =10,000 × 15 = 150,000

Paid-in Capital from Treasury Stock =10,000 × 2 = 20,000

 

 

 

 

 

 

Sept.1

Account titles and explanation

Debt

Credit

Cash

112,000

 

Paid-in Capital from Treasury Stock

8,000

 

Treasury Stock

 

120,000

 

Cash = 8,000 × 14 =112,000

Treasury Stock =8,000 × 15= 120,000

Paid-in Capital from Treasury Stock =8,000 × 1= 8,000

 

 

b) Restate the entry for September 1, assuming the treasury shares were sold at $12 per share. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Sept.1

Account titles and explanation

Debt

Credit

Cash

96000

 

Paid-in Capital from Treasury Stock

20,000

 

Retained Earnings

4,000

 

Treasury Stock

 

120000

 

Cash  = 8,000 × 12 =96000

Treasury Stock =8,000 × 15= 120,000

 

Problem 13-1A (Part level Submission)

 

DeLong Corporation was organized on January 1, 2014. It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 500,000 shares of no-par common stock with a stated value of $2 per share. The following stock transactions were completed during the first year.

Jan. 10 Issued 80,000 shares of common stock for cash at $4 per share.

Mar. 1 Issued 5,000 shares of preferred stock for cash at $105 per share.

Apr. 1 Issued 24,000 shares of common stock for land. The asking price of the land was $90,000. The fair value of the land was $85,000.

May. 1 Issued 80,000 shares of common stock for cash at $4.5 per share.

Aug. 1 Issued 10,000 shares of common stock to attorneys in payment of their bill of $30,000 for services performed in helping the company organize.

Sept. 1 Issued 10,000 shares of common stock for cash at $5 per share.

Nov. 1 Issued 1,000 shares of preferred stock for cash at $109 per share.

 

A) Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Jan. 10

Account titles and explanation

Debt

Credit

Cash  =80,000 x 4

320,000

 

Common stock =80,000 x 2 ($4-$2)

 

160,000

Paid-in Capital in Excess of Stated Value-Common Stock = 80,000 x 2

 

160,000

 

Mar. 1

Account titles and explanation

Debt

Credit

Cash

525000

 

Preferred stock

 

500,000

Paid-in Capital in Excess of Par-Preferred Stock

 

25,000

 

Cash = 5,000 x 105 =525000

Preferred Stock = 5,000 x 100 =500,000

Paid-in Capital in Excess of Par-Preferred Stock = 5,000 x 5 =25,000

 

 

 

Apr. 1

Account titles and explanation

Debt

Credit

Land

85,000

 

Common stock

 

48,000

Paid-in Capital in Excess of Stated Value-Common Stock

 

37,000

 

Common Stock = 24,000 x 2 =48,000

Paid-in Capital in Excess of Stated Value-Common Stock =85,000 – 48,000 =37,000

 

May. 1

Account titles and explanation

Debt

Credit

Cash

360,000

 

Common stock

 

160,000

Paid-in Capital in Excess of Stated Value-Common Stock

 

200,000

 

Cash = 80,000 x 4.5 = 360,000

Common Stock = 80,000 x 2 = 160,000

Paid-in Capital in Excess of Stated Value-Common Stock = 80,000 x 2.50 =200,000

 

Aug. 1

Account titles and explanation

Debt

Credit

Organization Expense

30,000

 

Common stock

 

20,000

Paid-in Capital in Excess of Stated Value-Common Stock

 

10,000

 

Common Stock =10,000 x 2 = 20,000

Paid-in Capital in Excess of Stated Value-Common Stock = 30,000 – 20,000 =10,000

 

 

 

Sept. 1

Account titles and explanation

Debt

Credit

Cash

50,000

 

Common stock

 

20,000

Paid-in Capital in Excess of Stated Value-Common Stock

 

30,000

 

Cash = 10,000 x 5 = 50,000

Common Stock = 10,000 x 2= 20,000

Paid-in Capital in Excess of Stated Value-Common Stock = 10,000 x 3 = 30,000

 

Nov. 1

Account titles and explanation

Debt

Credit

Cash

109,000

 

Preferred Stock

 

100,000

Paid-in Capital in Excess of Par-Preferred Stock

 

9,000

 

Cash = 1,000 x 109=109,000

Preferred Stock = 1,000 x 100=100,000

Paid-in Capital in Excess of Par-Preferred Stock = 1,000 x 9=9,000

 

B) Post to the stockholders’ equity accounts. (Post entries in the order of journal entries presented in the previous part.)

Preferred Stock

Date

Debt

Credit

Balance

Mar. 1

 

 

500,000

500,000

Nov. 1

 

 

100,000

600,000

Common Stock

Date

Debt

Credit

Balance

Jan. 10

 

 

160,000

160000

Apr. 1

 

48,000

208,000

May. 1

 

160,000

368,000

Aug. 1

 

20,000

388,000

Sept. 1

 

20,000

408,000

 

Paid-in Capital in Excess of Par-Preferred Stock

Date

Debt

Credit

Balance

Mar. 1

 

 

25,000

25,000

Nov. 1

 

 

9,000

34,000

 

 

Paid-in Capital in Excess of Stated Value-Common Stock

Date

Debt

Credit

Balance

Jan. 10

 

 

160,000

160000

Apr. 1

 

37000

197,000

May. 1

 

200,000

397,000

Aug. 1

 

10,000

407,000

Sept. 1

 

30,000

437,000

 

C)Prepare the paid-in capital section of stockholders’ equity at December 31, 2014. (Enter the account name only and do not provide the descriptive information provided in the question.)

DeLong Corporation Balance sheet (partial) December 31, 2014

 

Paid-in capital

 

 

 

 

Capital stock

 

 

Preferred Stock

 

600,000

Common Stock

 

408,000

Total Capital stock

 

1008000

 

Additional Paid-in capital

 

 

 

Paid-in Capital in Excess of Stated Value-Common Stock

437,000

 

Paid-in Capital in Excess of Par-Preferred Stock

34,000

 

Total Additional Paid-in capital

 

471,000

 

Total Paid-in Capital

 

 

1479,000

 

 

 

Brief Exercise 13-3

On May 10, Jack Corporation issues 3,400 shares of $12 par value common stock for cash at $22 per share. Journalize the issuance of the stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

May. 1

Account titles and explanation

Debt

Credit

Cash

74,800

 

Common stock

 

40,800

Paid-in Capital in Excess of Par-Common Stock

 

34,000

 

Cash = 3,400 x 22 = 74,800

Common Stock = 3,400 x 12 = 40,800

Paid-in Capital in Excess of Par-Common Stock = 3,400 x 10(22-12) = 34,000

Brief Exercise 13-5

Lei Inc.’s $11 par value common stock is actively traded at a market price of $16 per share. Lei issue 4,900 shares to purchase land advertised for sale at $74,980. Journalize the issuance of the stock in acquiring the land. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

Account titles and explanation

Debt

Credit

Land

74,800

 

Common stock

 

53900

Paid-in Capital in Excess of Par-Common Stock

 

24,500

 

Cash = 74,980

Common Stock = 4,900 x 11 = 53900

Paid-in Capital in Excess of Par-Common Stock = 4,900 x 6(16-11) = 24,500

 

Brief Exercise 13-6

On July 1, Raney Corporation purchases 590 shares of its $6 par value common stock for the treasury at a cash price of $9 per share. On September 1, it sells 300 shares of the treasury stock for cash at $13 per share.

 

Journalize the two treasury stock transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

July 1

Account titles and explanation

Debt

Credit

Treasury stock

5310

 

Cash

 

5310

Treasury stock = 590 x 9 =5,310

 

September 1

Account titles and explanation

Debt

Credit

Cash

3,900

 

Treasury stock

 

2700

Paid-in Capital from Treasury Stock

 

1200

Cash = 300 x 13 = 3,900

Treasury Stock = 300 x 9 = 2,700

Paid-in Capital from Treasury Stock = 300 x 4(13-9) =1200

Exercise 13-3

During its first year of operations, Foyle Corporation had the following transactions pertaining to its common stock.

 

Jan. 10 Issued 66,400 shares for cash at $6 per share.

July. 1 Issued 42,500 shares for cash at $8 per share

 

A) Journalize the transactions, assuming that the common stock has a par value of $6 per share. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

 

Jan. 10

Account titles and explanation

Debt

Credit

Cash

398,400

 

Common Stock

 

398,400

 

Cash = 66,400 x 6 = 398,400

 

 

 

July 1

Account titles and explanation

Debt

Credit

Cash

340,000

 

Common Stock

 

255,000

Paid-in Capital in Excess of Par-Common Stock

 

 

85,000

 

 

Cash = 42,500 x 8= 340,000

Common Stock = 42,500 x 6 = 255,000

Paid-in Capital in Excess of Par-Common Stock = 42,500 x 2(8-6) =85,000

 

 

B) Journalize the transactions, assuming that the common stock is no-par with a stated value of $1 per share. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

Jan. 10

Account titles and explanation

Debt

Credit

Cash

398,400

 

Common Stock

 

66400

Paid-in Capital in Excess of Stated Value-Common Stock

 

 

332000

 

Cash = 66,400 x 6 = 398,400

Common Stock = 66,400 x 1 = 66,400

Paid-in Capital in Excess of Stated Value-Common Stock = 66,400 x 5(6-1) = 332000

 

 

Jul. 1

Account titles and explanation

Debt

Credit

Cash

340,000

 

Common Stock

 

42,500

Paid-in Capital in Excess of Stated Value-Common Stock

 

 

29,7500

 

Cash = 42,500 x 8= 340,000

Common Stock = 42,500 x 1 = 42,500

Paid-in Capital in Excess of Stated Value-Common Stock = 42,500 x 7(8-1) = 29,7500

 

Exercise 13-5

Quay Co. had the following transactions during the current period.

 

Mar. 2 Issued 5,300 shares of $5 par value common stock to attorneys in payment of a bill for $32,500 for services performed in helping the company to incorporate.

 

Jun. 12 Issued 55,400 shares of $5 par value common stock for cash of $345,000.

 

Jul. 11 Issued 1,600 shares of $110 par value preferred stock for cash at $140 per share.

 

Nov. 28 Purchased 1,700 shares of treasury stock for $79,700.

 

Journalize the transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

Mar. 2.

Account titles and explanation

Debt

Credit

Organization Expense

32,500

 

Common Stock

 

26,500

Paid-in Capital in Excess of Par-Common Stock

 

 

6,000

Common Stock = 5,300 x 5 =26,500

 

Jun. 12

Account titles and explanation

Debt

Credit

Cash

345,000

 

Common Stock

 

277,000

Paid-in Capital in Excess of Par-Common Stock

 

 

68,000

Common Stock = 55,400 x 5 = 277,000

 

 

Jul. 11

Account titles and explanation

Debt

Credit

Cash

224,000

 

Preferred Stock

 

176,000

Paid-in Capital in Excess of Par-Preferred Stock

 

 

48,000

Cash = 1,600 x 140 = 224,000

Preferred Stock = 1,600 x 110 = 176,000

Paid-in Capital in Excess of Par-Preferred Stock = 1,600 x 30(140-110) = 48,000

 

 

 

 

Nov. 28

Account titles and explanation

Debt

Credit

Treasury Stock

79,700

 

Cash

 

79,700

 

Exercise 13-8

Rinehart Corporation purchased from its stockholders 5,700 shares of its own previously issued stock for $279,300. It later resold 1,900 shares for $52 per share, then 1,900 more shares for $47 per share, and finally 1,900 shares for $41 per share.

 

Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

To record purchase from stockholders

Account titles and explanation

Debt

Credit

Treasury Stock

279,300

 

Cash

 

279,300

 

 

To record sales of shares at $52 per share

Account titles and explanation

Debt

Credit

Cash

98,800

 

Treasury Stock

 

93,100

Paid-in Capital from Treasury Stock

 

5,700

Cash = 1,900 x 52 = 98,800

Treasury Stock = 1,900 x 49 = 93,100

 

To record sales of shares at $47 per share

Account titles and explanation

Debt

Credit

Cash

89,300

 

Paid-in Capital from Treasury Stock

3,800

 

Treasury Stock

 

93,100

Cash = 1,900 x $47= 89,300

Treasury Stock = 1,900 x 49 = 93,100

 

 

To record sales of shares at $41 per share

Account titles and explanation

Debt

Credit

Retained Earnings

13,300

 

Paid-in Capital from Treasury Stock

1,900

 

Cash

77,900

 

Treasury Stock

 

93,100

 

Cash = 1,900 x $41=77,900

Paid-in Capital from Treasury Stock = 5,700 – $3,800 = 1,900

Treasury Stock = 1,900 x 49 = 93,100

 

 

Problem 13-2A

Fechter Corporation had the following stockholders’ equity accounts on January 1, 2014: Common Stock ($4 par) $405,680, Paid-in Capital in Excess of Par Common Stock $178,180, and Retained Earnings $101,940. In 2014, the company had the following treasury stock transactions.

 

Mar. 1 Purchased 6,570 shares at $9 per share

June 1 Sold 1,480 shares at $13 per share.

Sept. 1 Sold 1,590 shares at $11 per share.

Dec. 1 Sold 1,240 shares at $6 per share.

 

Fechter Corporation uses the cost method of accounting for treasury stock. In 2014, the company reported net income of $29,080.

 

A) Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2014, for net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.

 

Mar. 1

Account titles and explanation

Debt

Credit

Treasury Stock

59130

 

Cash

 

59130

Treasury Stock = 6,570 x 9 = 59130

 

June 1

Account titles and explanation

Debt

Credit

Cash

19,240

 

Treasury Stock

 

13,320

 

Paid-in Capital from Treasury Stock

 

 

5920

Cash = 1,480 x 13= 19,240

Treasury Stock = 1,480 x 9 = 13,320

Paid-in Capital from Treasury Stock = 1,480 x 4(13-9) = 5920

 

Sept. 1

Account titles and explanation

Debt

Credit

Cash

17,490

 

Treasury Stock

 

14,310

 

Paid-in Capital from Treasury Stock

 

 

3,180

Cash = 1,590 x 11 = 17,490

Treasury Stock = 1,590 x 9 = 14,310

Paid-in Capital from Treasury Stock = 1,590 x 2(11-9) = 3,180

 

Dec. 1

Account titles and explanation

Debt

Credit

Cash

7,440

 

Paid-in Capital from Treasury Stock

3720

 

Treasury Stock

 

11,160

Cash = 1,240 x 6 = 7,440

Paid-in Capital from Treasury Stock = 1,240 x 3 (9-6) = 3,720

Treasury Stock = 1,240 x 9 = 11,160

 

 

 

Dec. 31

Account titles and explanation

Debt

Credit

Income Summary

29,080

 

Retained Earnings

 

29,080

 

B) Open accounts for Paid-in Capital from Treasury Stock, Treasury Stock, and Retained Earnings. Post to these accounts using J10 as the posting reference. (Post entries in the order of journal entries presented in the previous part.)

 

Paid-in Capital from Treasury Stock

Date

Explanation Ref

Debt

Credit

Balance

June 1

 

 

J10

 

5920

5920

Sept. 1

J10

 

3180

9,100

Dec. 1

J10

3,720

 

5,380

 

 

Treasury Stock

Date

Explanation Ref

Debt

Credit

Balance

Mar. 1

 

J10

59130

 

59130

June 1

 

J10

 

13320

45,810

Sept. 1

J10

 

14310

31,500

Dec. 1

J10

 

11160

20,340

 

Retained Earnings

Date

Explanation Ref

Debt

Credit

Balance

Jan. 1

 

ü   

 

 

101,940

Dec. 1

 

J10

 

29,080

131020

C) Prepare the stockholders’ equity section for Fechter Corporation at December 31, 2014. (Enter the account name only and do not provide the descriptive information provided in the question.)

 

Fechter Corporation Balance sheet (partial) December 31, 2014

 

Stockholders’ equity

 

 

Paid-in Capital

 

 

Capital Stock

 

 

Common Stock

 

405,680

 

Additional Paid-in Capital

 

 

Paid-in Capital in Excess of Par-Common Stock

178,180

 

Paid-in Capital from Treasury Stock

5380

 

Total Additional Paid-in Capital

 

183,560

Total Paid-in Capital

 

589,240

 

Retained Earnings

 

 

Total paid in Capital and Retained Earnings

 

720,260

Less

Treasury Stock

 

20,340

Total Stockholders’ equity = 125,000 -11,000 =

 

699,920

    

 

Stockholders’ equity

 

 

 

 

 

 

Paid-in capital

 

 

 

 

 

 

Capital stock

 

 

 

 

 

 

 

Common stock, $4 par, 101,420 shares issued and 99,160 outstanding

 

 

 

 

$405,680

 

     

 Additional paid-in capital

 

 

 

 

 

 

 

Paid-in Capital in Excess of Par-Common Stock

 

 

     $178,180

 

 

 

Paid-in Capital from Treasury

 

 

 5,380

 

 

 

            

Total additional paid-in capital

 

 

 

 

       183,560

 

Total paid-in capital

 

 

 

 

589,240

 

Retained earnings

 

 

 

 

131,020

 

Total paid-in capital and retained earnings

 

 

 

 

720,260

 

 Less: Treasury stock (2,260 common shares, at cost)

 

 

 

 

(20,340

)

Total stockholders’ equity

 

 

 

 

$699,920

 

 

 

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