Treasury stock transactions

Pr. 15-143—Treasury stock transactions.

The original sale of the $50 par value common shares of Gray Company was recorded as follows:

Cash 290,000

Common Stock 250,000

Paid-in Capital in Excess of Par 40,000

Instructions

Record the treasury stock transactions (given below) under the cost method:

Transactions:

(a)Bought 300 shares of common stock as treasury shares at $62.

(b)Sold 80 shares of treasury stock at $60.

(c)Sold 40 treasury shares at $68.

Solution 15-143

DateAccount NameRefDebit Credit

a

b

c

Pr. 15-145—Equity transactions.

Foley Corporation has the following capital structure at the beginning of the year:

6% Preferred stock, $50 par value, 20,000 shares authorized, 

6,000 shares issued and outstanding$ 300,000

Common stock, $10 par value, 60,000 shares authorized, 

40,000 shares issued and outstanding400,000

Paid-in capital in excess of par 110,000

Total paid-in capital810,000

Retained earnings 440,000

Total stockholders' equity$1,250,000

Instructions

(a)Record the following transactions which occurred consecutively (show all calculations).

1.A total cash dividend of $90,000 was declared and payable to stockholders of record. Record dividends payable on common and preferred stock in separate accounts.

2.A 10% common stock dividend was declared. The average market value of the common stock is $18 a share.

3.Assume that net income for the year was $150,000 (record the closing entry) and the board of directors appropriated $70,000 of retained earnings for plant expansion.

(b)Construct the stockholders' equity section incorporating all the above information.

Solution 15-145

(a)

DateAccount NameRefDebit Credit

1

Show Computation for Transaction #22

3

Solution 15-145 (cont.)

(b)

Show computation for Retained Earnings – Unappropriated:

*Pr. 15-146—Dividends on preferred and common stock.

Rensing, Inc., has $800,000 of 8% preferred stock and $1,200,000 of common stock outstanding, each having a par value of $10 per share. No dividends have been paid or declared during 2009 and 2010. As of December 31, 2011, it is desired to distribute $488,000 in dividends.

Instructions

How much will the preferred and common stockholders receive under each of the following assumptions:

(a)The preferred is noncumulative and nonparticipating.

(b)The preferred is cumulative and nonparticipating.

(c)The preferred is cumulative and fully participating.

(d)The preferred is cumulative and participating to 12% total.

Solution 15-146

(a)PreferredCommonTotal

(b)PreferredCommonTotal

(c)PreferredCommonTotal

(d)PreferredCommonTotal

Pr. 15-147—Basic EPS.

Assume that the following data relative to Kane Company for 2010 is available:

Net Income $2,100,000

Transactions in Common Shares Change Cumulative

Jan. 1, 2010, Beginning number 700,000

Mar. 1, 2010, Purchase of treasury shares(60,000)640,000

June 1, 2010, Stock split 2-1640,0001,280,000

Nov. 1, 2010, Issuance of shares120,0001,400,000

8% Cumulative Convertible Preferred Stock

Sold at par, convertible into 200,000 shares of common (adjusted for split).$1,000,000

Instructions

(a)Compute the basic earnings per share for 2010. (Round to the nearest penny.)

Solution 15-147

Computation of weighted average shares outstanding during the year:

DateActivity DescriptionNumber of Shares

January 1Outstanding Shares

(a)Basic Earnings per share: 

CAPITULO 15 INVESTMENTS

PROBLEMS

Pr. 17-114—Trading equity securities.

Gordon Company has the following securities in its portfolio of trading equity securities on December 31, 2007:

Cost Fair Value

5,000 shares of Milner Corp., Common$155,000$139,000

10,000 shares of Eddy, Common 182,000 190,000

$337,000$329,000

All of the securities had been purchased in 2007. In 2008, Gordon completed the following securities transactions:

March 1Sold 5,000 shares of Milner Corp., Common @ $31 less fees of $1,500.

April 1Bought 600 shares of Yount Stores, Common @ $45 plus fees of $550.

The Gordon Company portfolio of trading equity securities appeared as follows on December 31, 2008:

Cost Fair Value

10,000 shares of Eddy, Common$182,000$195,500

600 shares of Yount Stores, Common 27,550 25,500

$209,550$221,000

Instructions: Prepare the general journal entries for Gordon Company for:

(a)the 2007 adjusting entry. (c)the purchase of the Yount Stores' stock.

(b)the sale of the Milner Corp. stock. (d)the 2008 adjusting entry

Solution 17-114

DateAccount NameRefDebit Credit

(a)Show Computation for Transaction (a)

(b)Account NameRefDebitCredit

Show Computation for Transaction (b)

(c)Account NameRefDebitCredit

Show Computation for Transaction (c)

(d)Account NameRefDebitCredit

Show Computation for Transaction (d)