Wiley Assignment Week 4

wiley_assignment_week_4_problems.docx

Home >Business & Finance homework help >Accounting homework help >Wiley Assignment Week 4

Indicate whether each of the following statements is true or false.

1.	The corporation is an entity separate and distinct from its owners.
2.	The liability of stockholders is normally limited to their investment in the corporation.
3.	The relative lack of government regulation is an advantage of the corporate form of business.
4.	There is no journal entry to record the authorization of capital stock.
5.	No-par value stock is quite rare today.

E11-15

On October 31, the stockholders' equity section of Omar Company consists of common stock $600,000 and retained earnings $900,000. Omar is considering the following two courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share.

Complete the tabular summary of the effects of the alternative actions on the components of stockholders' equity and outstanding shares. (If answer is zero, please enter 0. Do not leave any fields blank.)

	Before Action	After Stock Dividend	After Stock Split
Stockholders' equity
Paid-in capital
Common Stock	$	$	$
In excess of par value
Total paid-in capital
Retained earnings
Total stockholders' equity	$		$

Outstanding shares

E11-16

Before preparing financial statements for the current year, the chief accountant for Springer Company discovered the following errors in the accounts.

1. The declaration and payment of $50,000 cash dividend was recorded as a debit to Interest Expense $50,000 and a credit to Cash $50,000.

2. A 10% stock dividend (1,000 shares) was declared on the $10 par value stock when the market value per share was $16. The only entry made was: Retained Earnings (Dr.) $10,000 and Dividend Payable (Cr.) $10,000. The shares have not been issued.

3. A 4-for-1 stock split involving the issue of 400,000 shares of $5 par value common stock for 100,000 shares of $20 par value common stock was recorded as a debit to Retained Earnings $2,000,000 and a credit to Common Stock $2,000,000.

Prepare the correcting entries at December 31. (For multiple debit/credit entries, list amounts from largest to smallest e.g. 10, 5, 3, 2.)

Date

Account/Description

Debit

Credit

1. Dec. 31

2. Dec. 31

3. Dec. 31

P11-6A

Arnold Corporation has been authorized to issue 40,000 shares of $100 par value, 8%, noncumulative preferred stock and 2,000,000 shares of no-par common stock. The corporation assigned a $5 stated value to the common stock. At December 31, 2011, the ledger contained the following balances pertaining to stockholders' equity.

Preferred Stock	$240,000
Paid-in Capital in Excess of Par Value-Preferred	56,000
Common Stock	2,000,000
Paid-in Capital in Excess of Stated Value-Common	5,700,000
Treasury Stock-Common (1,000 shares)	22,000
Paid-in Capital from Treasury Stock	3,000
Retained Earnings	560,000

The preferred stock was issued for land having a fair market value of $296,000. All common stock issued was for cash. In November, 1,500 shares of common stock were purchased for the treasury at a per share cost of $22. In December, 500 shares of treasury stock were sold for $28 per share. No dividends were declared in 2011.

Prepare the journal entries for the: (For multiple debit/credit entries, list amounts from largest to smallest e.g. 10, 5, 3, 2.)

1. Issuance of preferred stock for land.

2. Issuance of common stock for cash.

3. Purchase of common treasury stock for cash.

4. Sale of treasury stock for cash.

	Account/Description	Debit	Credit
1.


2.


3.

4.

Complete the stockholders' equity section at December 31, 2011. (Order multiple accounts in the standard format used in the text. Enter all amounts as positive amounts and subtract where necessary.)

ARNOLD CORPORATION
Stockholders' equity
Paid-in capital

,
$ par value,
noncumulative, shares authorized,
shares issued and outstanding		$
,
$ stated value,
shares authorized
shares issued and
outstanding
Total capital stock

	$


Total additional paid-in capital
Total paid-in capital

Total paid-in capital and retained earnings
Less:
Total stockholders' equity		$

P11-8A

The following stockholders' equity accounts arranged alphabetically are in the ledger of McGrath Corporation at December 31, 2011.

Common Stock ($10 stated value)	$1,500,000
Paid-in Capital from Treasury Stock	6,000
Paid-in Capital in Excess of Stated Value-Common Stock	690,000
Paid-in Capital in Excess of Par Value-Preferred Stock	288,400
Preferred Stock (8%, $100 par, noncumulative)	400,000
Retained Earnings	776,000
Treasury Stock-Common (8,000 shares)	88,000

Complete the stockholders' equity section at December 31, 2011. (List entries by the format used in the text. Enter all amounts as positive amounts and subtract where necessary.)

MCGRATH CORPORATION
Stockholders' equity
Paid-in capital

,
$ par noncumulative
shares issued and outstanding		$
,
$ stated value,
shares issued and
outstanding
Total capital stock

	$


Total additional paid-in capital
Total paid-in capital

Total paid-in capital and retained earnings
Less:
Total stockholders' equity		$

Compute the book value per share of the common stock, assuming the preferred stock has a call price of $110 per share. (Round answer to 2 decimal places, e.g. 10.50.)

Indicate whether each of the following statements is true or false.

The corporation is an entity separate and distinct from its owners.

The liability of stockholders is normally limited to their investment in the corporation.

The

relative lack of government regulation is an advantage of the corporate form of business.

There is no journal entry to record the authorization of capital stock.

par value stock is quite rare today.

E11

On October 31, the stockholders' equity section of Omar Company consists of common stock $600,000 and retained earnings $900,

000.

Omar is considering the following two courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value share

outstanding,

or (2) effecting a 2

for

1 stock split that will reduce par value to $5 per share. The current market price is $14 per share.

Complete the tabular summary of the effects of the alternative actions on the components of stockholders' equity and outstand

ing shares.

(If

answer is zero, please enter 0. Do not leave any fields blank.)

Before Action

After Stock Dividend

After Stock

Split

Stockholders' equity

Paid

in capital

Common Stock

In excess of par value

Total paid

in capital

Retained earnings

Total stockholders' equity

Outstanding shares

Indicate whether each of the following statements is true or false.

1. The corporation is an entity separate and distinct from its owners.

2. The liability of stockholders is normally limited to their investment in the corporation.

3. The relative lack of government regulation is an advantage of the corporate form of business.

4. There is no journal entry to record the authorization of capital stock.

5. No-par value stock is quite rare today.

E11-15

On October 31, the stockholders' equity section of Omar Company consists of common stock $600,000 and retained earnings $900,000.

Omar is considering the following two courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares outstanding,

or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share.

Complete the tabular summary of the effects of the alternative actions on the components of stockholders' equity and outstanding shares. (If

answer is zero, please enter 0. Do not leave any fields blank.)

Before Action After Stock Dividend After Stock Split

Stockholders' equity

Paid-in capital

Common Stock

In excess of par value

Total paid-in capital

Retained earnings

Total stockholders' equity

Outstanding shares