ACC 423 WileyPLUS Assignment Week 2 Assignment

1.

Issued 5,000 shares of stock at $45 per share, less costs related to the issuance of the stock totaling $7,000.

2.

Issued 1,000 shares of stock for land appraised at $50,000. The stock was actively traded on a national stock exchange at approximately $46 per share on the date of issuance.

3.

Purchased 500 shares of treasury stock at $43 per share. The treasury shares purchased were issued in 2010 at $40 per share.

(a)

Prepare the journal entry to record item 1.

(b)

Prepare the journal entry to record item 2.

(c)

Prepare the journal entry to record item 3 using the cost method.

No.

Account Titles and Explanation

Debit

Credit

(a)

Exercise 17-2

On January 1, 2013, Dagwood Company purchased at par 12% bonds having a maturity value of $300,000. They are dated January 1, 2013, and mature January 1, 2018, with interest receivable December 31 of each year. The bonds are classified in the held-to-maturity category.

(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Exercise 17-7

On December 21, 2013, Bucky Katt Company provided you with the following information regarding its trading securities.

During 2014, Colorado Company stock was sold for $9,400. The fair value of the stock on December 31, 2014, was Clemson Corp. stock—$19,100; Buffaloes Co. stock—$20,500.

(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Warning

Ok

Cancel

Exercise 17-13

Parent Co. invested $1,000,000 in Sub Co. for 25% of its outstanding stock. Sub Co. pays out 40% of net income in dividends each year.

Use the information in the following T-account for the investment in Sub to answer the following questions.

(a) How much was Parent Co.’s share of Sub Co.’s net income for the year?

(b) How much was Parent Co.’s share of Sub Co.’s dividends for the year?

(c) What was Sub Co.’s total net income for the year?

(d) What was Sub Co.’s total dividends for the year?

P15-1 (Equity Transactions and Statement Preparation) On January 5, 2014, Phelps Corporation received

a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating

preferred stock, and 50,000 shares of $10 par value common stock. It then completed these transactions.

Jan. 11 Issued 20,000 shares of common stock at $16 per share.

Feb. 1 Issued to Sanchez Corp. 4,000 shares of preferred stock for the following assets: equipment with a fair

value of $50,000; a factory building with a fair value of $160,000; and land with an appraised value of

$270,000.

July 29 Purchased 1,800 shares of common stock at $17 per share. (Use cost method.)

Aug. 10 Sold the 1,800 treasury shares at $14 per share.

Dec. 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend.

Dec. 31 Closed the Income Summary account. There was a $175,700 net income.

Instructions

(a) Record the journal entries for the transactions listed above.

(b) Prepare the stockholders’ equity section of Phelps Corporation’s balance sheet as of December 31,

2014.

P15-11 (Stock and Cash Dividends) Earnhart Corporation has outstanding 3,000,000 shares of common stock of a par value of $10 each. The balance in its Retained Earnings account at January 1, 2014, was $24,000,000, and it then had Paid-in Capital in Excess of Par—Common Stock of $5,000,000. During 2014, the company’s net income was $4,700,000. A cash dividend of $0.60 a share was declared on May 5, 2014, and was paid June 30, 2014, and a 6% stock dividend was declared on November 30, 2014, and distributed to stockholders of record at the close of business on December 31, 2014. You have been asked to advise on the proper accounting treatment of the stock dividend.

The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows.

October 31, 2014 $31

November 30, 2014 $34

December 31, 2014 $38

Instructions

(a) Prepare the journal entry to record the declaration and payment of the cash dividend.

(b) Prepare the journal entry to record the declaration and distribution of the stock dividend.

(c) Prepare the stockholders’ equity section (including schedules of retained earnings and additional paid-in capital) of the balance sheet of Earnhart Corporation for the year 2014 on the basis of the foregoing information. Draft a note to the financial statements setting forth the basis of the accounting for the stock dividend, and add separately appropriate comments or explanations regarding the basis chosen.

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