Chap013 Ex

Stockholders’ Equity

Chapter 13Exercises

Issuing StockIssuing Stock

• In-Class Exercise (Form groups and work exercise):

Exercise Page E13- 22 788 Stock Issue Transactions (Use the format, as reflected on the next slide, to complete this exercise)

Date Description DebitCredit

General Journal


ExerciseExercise PagePage E13- 22E13- 22 788 Issuing Stock at Par 788 Issuing Stock at Par and No-Parand No-Par


Exercise E13-22Exercise E13-22:: The charter of Evergreen Capital Corporation The charter of Evergreen Capital Corporation

authorizes the issuance of 900 shares of preferred stock authorizes the issuance of 900 shares of preferred stock and 1,250 shares of common stock. During a two-month and 1,250 shares of common stock. During a two-month period, Evergreen completed these stock issuance period, Evergreen completed these stock issuance transactions:transactions:

Mar. 23 Issues 230 shares of $4 par value common stock Mar. 23 Issues 230 shares of $4 par value common stock for cash offor cash of $5 per share. $5 per share.Apr. 12 Received inventory with a market value of Apr. 12 Received inventory with a market value of $23,000 and $23,000 and equipment with a market value of equipment with a market value of $20,000 for 320 shares of$20,000 for 320 shares of the $4 par value common stock. the $4 par value common stock. 17 Issued 900 shares of 5%, $20 par value 17 Issued 900 shares of 5%, $20 par value preferred stock forpreferred stock for $20 per share. $20 per share.

RequirementsRequirements::(1) Record the transactions in the general journal.(1) Record the transactions in the general journal.(2) Prepare the stockholders’ equity section of the (2) Prepare the stockholders’ equity section of the Evergreen balanceEvergreen balance sheet as of April 30, 2014. Retained Earnings sheet as of April 30, 2014. Retained Earnings balance is $79,000.balance is $79,000.



End of Exercise


Cash DividendsCash Dividends

• In-Class Exercise (Form groups and work exercises):

Exercise Page E13-23 788 Dividends-Common/Preferred (Cumulative)


Exercise E13-23Exercise E13-23:: Northern Communications has the following Northern Communications has the following

stockholders’ equity:stockholders’ equity:Preferred Stock – 6%, $11 Par Value; 150,000 sharesPreferred Stock – 6%, $11 Par Value; 150,000 shares authorized, 20,000 shares issued and outstanding…….. $ authorized, 20,000 shares issued and outstanding…….. $ 220,000220,000Common Stock -- $3 Par Value; 575,000 sharesCommon Stock -- $3 Par Value; 575,000 shares authorized, 400,000 shares issued and outstanding…… authorized, 400,000 shares issued and outstanding…… $1,200,000$1,200,000Retained Earnings……………………………………………... $ 190,000Retained Earnings……………………………………………... $ 190,000

RequirementsRequirements::(1) Assuming the preferred stock is (1) Assuming the preferred stock is cumulative, compute , compute the amountthe amount of dividends to preferred stockholders and of dividends to preferred stockholders and stockholders for 2014stockholders for 2014 and 2015 if total dividend are if total dividends and 2015 if total dividend are if total dividends are $12,200 in 2014are $12,200 in 2014 and $55,000 in 2015. and $55,000 in 2015.(2) Record the journal entries for 2014, assuming that (2) Record the journal entries for 2014, assuming that Northern Northern declared the dividend on December 1 for declared the dividend on December 1 for stockholders of record stockholders of record on December 10. Northern paid the dividend on on December 10. Northern paid the dividend on December 20.December 20.(3) (3) Record the journal entries for 2015, assuming that Record the journal entries for 2015, assuming that Northern Northern declared the dividend on December 1 for declared the dividend on December 1 for stockholders of record stockholders of record on December 15. Northern paid the dividend on on December 15. Northern paid the dividend on December 28.December 28.


Preferred Dividend RequirementPreferred Dividend Requirement

NoteNote: Preferred stockholders are entitled : Preferred stockholders are entitled to no more than $13,200 in any one year as to no more than $13,200 in any one year as follow:follow: (a) $11 par value x 6% = $.66 per (a) $11 par value x 6% = $.66 per shareshare (b) $.66 x 20,000 shares = $13,200 (b) $.66 x 20,000 shares = $13,200


Preferred dividends in arrearsPreferred dividends in arrears $13.200 - $12,200 = $1,000$13.200 - $12,200 = $1,000



NoteNote: Preferred stockholders are entitled : Preferred stockholders are entitled to the same $13,200 dividend requirement to the same $13,200 dividend requirement as in year 2014as in year 2014





End of Exercise

Cash and Stock DividendsCash and Stock Dividends


Exercise Page E13-26 790 Cash and Stock Dividends(Use the format, as reflected on the

next slide, to complete this exercise)


General Journal


ExerciseExercise PagePage E13-26 790 Cash and E13-26 790 Cash and Stock DividendsStock Dividends

Exercise E13-26Exercise E13-26:: Painting Schools, Inc. is authorized to issue 200,000 Painting Schools, Inc. is authorized to issue 200,000 shares of $1 parshares of $1 par common stock. common stock. The company issued 77,000 shares at $3 per share.The company issued 77,000 shares at $3 per share. When the market price of common stock was $5 per share, When the market price of common stock was $5 per share, PaintingPainting declared and distributed a 10% stock dividend. declared and distributed a 10% stock dividend. Later, Painting declared and paid a $0.25 per share cash Later, Painting declared and paid a $0.25 per share cash dividend.dividend.RequirementsRequirements:: (1) Journalize the declaration and the distribution of (1) Journalize the declaration and the distribution of the stock dividend.the stock dividend. (2) Journalize the declaration and the payment of the (2) Journalize the declaration and the payment of the cash dividend.cash dividend.



Dividend Shares ComputationDividend Shares Computation77,000 shares x 10% = 7,700 77,000 shares x 10% = 7,700

sharesshares7,700 shares x $5 = $38,5007,700 shares x $5 = $38,500


7,700 shares x $1 = $7,7007,700 shares x $1 = $7,700


Common


77,000 shares + 7,700 shares = 77,000 shares + 7,700 shares = 84,70084,700

84,700 shares x $0.25 = $21,17584,700 shares x $0.25 = $21,175


End of Exercise



Exercise No. Page E13-30 792 Treasury Stock Transactions

(Use the format, as reflected on the next slide, to complete this exercise)

Treasury Stock TransactionsTreasury Stock Transactions


General Journal

ExerciseExercise PagePage E13-30 792 E13-30 792 Treasury StockTreasury Stock


Exercise E13-30Exercise E13-30::Stock transactions for Careful Driving School, Inc. Stock transactions for Careful Driving School, Inc. follows:follows:Mar. 4 Issued 22,000 shares of $1 par value common Mar. 4 Issued 22,000 shares of $1 par value common stock at $18 perstock at $18 per share. share.May 22 Purchased 1,400 shares of treasury stock – common May 22 Purchased 1,400 shares of treasury stock – common at $11 perat $11 per share. share.Sep. 22 Sold 500 shares of treasury stock – common at $24 per share.Oct. 14 Sold 900 shares of treasury stock – common at $9 per share.Requirement: (1) Journalize the transactions.



End of Exercise


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