1. At the end of fiscal year 2021, Horris Legal Services and Perfect Doughnuts reported these
adapted amounts on their balance sheets (all amounts in millions except for par value per
share):
(Click the icon to view the Horris Legal Services data.)
Horris Legal Services:
Common stock,$0.01 per value, 2,200 shares issued $ 22
Additional paid in Capital 17,600
(Click the icon to view the Perfect Doughnuts data.)
Perfect Doghnuts:
Common stock, no par value, 64 shares issued $ 294
Assume each company issued its stock in a single transaction. Journalize each company's issuance of its
stock, using its actual account titles. Explanations are not required. (Enter amounts in millions. Record
debits first, then credits. Exclude explanations from any journal entries.
Begin by journalizing the Horris Legal Services common stock issuance.
Journal Entry
Accounts Debit Credit
Millions
Cash 17622
Common stock 22
Additional Paid in Capital 17600
Begin by journalizing the Perfect Doghnoughts common stock insurance
Journal Entry
Accounts Debit Credit
Millions
Cash 294
Common stock 294
2. On January 10, 2022, Creative Design Services purchased treasury stock at a cost of $21 million.
On July 3, 2022, Creative resold some of the treasury stock for $7 million; this resold treasury
stock had cost the company $2 million. Record the purchase and resale of Creative's treasury
stock. Overall, how much did stockholders' equity increase or decrease as a result of the two
treasury-stock transactions?
First record the purchase of the treasury stock
Journal Entry
Date Accounts Debit Credit
Jan 10 Millions
Treasury Stock 21
Cash 21
Next, record the resale of the treasury stock
Journal Entry
Date Accounts Debit Credit
July 3 Millions
Cash 7
Paid-in Capital from
Treasury Stock
Transactions
5
Treasury stock 2
Overall, how much did stockholders' equity increase or decrease as a result of the two treasury-stock
transactions? (Enter the overall increase or decrease in millions. Use a minus sign or parentheses to
identify a decrease.) =(14)
3. On February 5, 2021, Affordable Rental Corporation's board of directors declared a dividend of
$0.35, to be paid on March 18, 2021, to the shareholders of record as of the close of business on
March 9, 2021. Affordable has 3,500,000 shares of $0.01 par-value common stock authorized
with 1,400,000 shares issued and outstanding. The company has no preferred stock. Record the
declaration of the dividend and the payment of the dividend. Include the proper dates with each
journal entry. (Record debits first, then credits. Exclude explanations from any journal entries.)
Record the journal entry for the declaration of dividend. Be sure to select the proper date for the
entry.
Journal Entry
Date Accounts Debit Credit
2021 Millions
Feb 5 Retained Earnings 490000
Dividends Payable 490000
Record the journal for the payment of the dividend. Be sure to select the proper date for the entry.
Journal Entry
Date Accounts Debit Credit
2021 Millions
March 18 Dividends Payable 490000
Cash 490000
4. The financial statements of Mountaintop Employment Services, Inc., reported the
following accounts:
Data Table
Paid-in capital in
excess of par
$ 352,000 Total revenues $1,740,000
Notes Payable (short-
term)
52000 Acounts payable 240,000
Common stock, $0.01
par 900,000 shares
issued
9,000 Retained earnings 664,000
Long-term debt 28,000 Other current liabilities 240,000
Total Expenses 1,040,000
Prepare the stockholders' equity section of Mountaintop's balance sheet. Net income has
already been closed to Retained Earnings. (Enter the accounts in the proper order for the
stockholders' equity section of the balance sheet. Use parentheses or a minus sign for numbers
to be subtracted.)
Balance Sheet (Partial)
Stockholders Equity
Common stock, $ 0.01 Par, 900,000 shares issued 9,000
Paid in capital in excess of par 352,000
Total paid-in capital 361,000
Retained earnings 664,000
Total stock holders’ equity 1,025,000
5. The financial statements of Valleyview Employment Services, Inc., reported the
following accounts:
Data Table
Paid-in capital in
excess of par
$ 338,000 Total revenues $1,620,000
Notes Payable (short-
term)
68,000 Accounts payable 200,000
Common stock, $0.01
par 700,000 shares
issued
7,000 Retained earnings 676,000
Long-term debt 24,000 Other current liabilities 260,000
Total Expenses 980,000
Balance Sheet (Partial)
Stockholders Equity
Common stock, $ 0.01 Par, 700,000 shares issued 7,000
Paid in capital in excess of par 338,000
Total paid-in capital 345,000
Retained earnings 676,000
Total stock holders’ equity 1,021,000
Calculate the following for Valleyview Employment Services:
a. Net income(Net Income = Total Revenue — Total Expenses)
Valleyview's net income is $640,000
Part 2
b. Total liabilities (Total liability is the sum of long-term and short-term liabilities. They are part of the
common accounting equation, assets = liabilities + equity.)
Valleyview's total liabilities are $552,000
Part 3
c. Total assets (use the accounting equation)
Valleyview's total assets are $1,573,000
Part 4
d. Net profit margin ratio (Enter your answer as a percentage rounded to the nearest whole percent.)
Valleyview's net profit margin ratio is 40 %
Part 5
e. Asset turnover (If averages are used in the formula, use the totals given or previously calculated
instead. Enter your answer as a decimal rounded to two places, X.XX.)
Your net sales are the sum of gross sales minus the total deductions. For example, if you had gross sales
of $100,000 minus $2,000 in sales discounts, $1,000 in sales allowances and $1,000 in sales returns, your
net sales are $96,000.
Valleyview's asset turnover is 1.03
Part 6
f. Leverage ratio (If averages are used in the formula, use the totals given or previously calculated
instead. Enter your answer as a decimal rounded to two places, X.XX.)
Valleyview's leverage ratio is 1.54
Part 7
g. Return on equity (If averages are used in the formula, use the totals given or previously calculated
instead. Enter your answer as a percentage rounded to the nearest whole percent.)
Valleyview's return on equity is 63 %
Part 8
What additional information do you need before you can use this data to make decisions? (If an input
field is not used in the table, leave the field empty; do not make a selection.)
Data Table
Flannery Corporation
Statement of Stockholders’ Equity
For Year Ended December 31, 2021
Common Stock
$2 Par
Additional Paid-
in Capital
Retained
Earnings
Treasury
Stock
Treasury
Stockholders
Equity
Balance
December
31,2020
20,000 17,000 225,000 (28,000) 234,000
Issuance of
stock
64,000 500,000 564,000
Net income 70,000 70,000
Cash Dividends (27,000) (27,000)
Purchase of
Treasury stock
(9,000) (9,000)
Sale of Treasury
stock
1000 8,500 9,500
Balance
December
31,2021
84,000 518,000 268,000 (28,000) 841,500
6. Use the following statement of stockholders’ equity to answer the following questions about
Flannery Corporation:
Comparative data for competitors.
Prior year returns from the company.
Data Table
Powered by TCPDF (www.tcpdf.org)
