Accounting Problems

Accounting 202 - Assignment 3

Problem 1

Gipper's Wholesale, Inc. reported the following information at December 31, 2010:

Common Stock, $1 par, 100,000 shares authorized $ 80,000

Additional Paid-In Capital 60,000

Total Capital Stock 140,000

Retained Earnings 40,000

Less: Treasury Stock (2,000 common shares at cost) <20,000>

Total Stockholders' Equity $160,000

Answer the following questions for Gipper's Wholesale:

A) How many shares of common stock are issued?

B) How many shares of common stock are outstanding?

C) Assuming that all shares were sold at the same price, what was the original selling

price per share?

D) If the company declared a 2-for-1 stock split on December 31, 2010, describe the

resulting change, if any, in the amount of Gipper's capital stock accounts and the par

value of the common stock.

Problem 2

Meyer's Markets, Inc. reported the following information at January 1, 2010:

Common Stock, $1 par, 100,000 shares authorized, 50,000 shares issued

and outstanding $50,000

During 2010, the following transactions occurred:

June 10 Repurchased 1,000 shares of its outstanding common stock for $10 per share.

July 1 Reissued 500 shares of treasury stock for $11 per share.

September 1 Reissued 500 shares of treasury stock for $9 per share.

Prepare the journal entries that Meyer needs to record for each of these 2010 transactions.

Problem 3

Throughout the years 2007 to 2009, Bennington Town Center, Inc. had the following capital structure:

8% Preferred Stock, $10 par, 10,000 shares authorized, 5,000 shares issued

and outstanding $50,000

Common Stock, $2 par, 25,000 shares authorized, 20,000 shares issued and

outstanding 40,000

Additional Paid-In Capital:Preferred Stock 60,000

Common Stock 80,000

Total Capital Stock $230,000

The board of directors of Bennington Town Center determined the total amount available for dividends in

each year from 2007 through 2009 as shown in the following table. Complete the table to indicate the

portion of the dividend allocated to preferred and common stockholders in each year. Assume that the

preferred stock is noncumulative and nonparticipating.

Amount Available

Year for Dividends Preferred Dividends Common Dividends

2007 $8,000

2008 $5,000

2009 $3,000

Problem 4

The stockholders' equity accounts of Druthers, Inc. were as follows at December 31, 2010:

Common Stock, $1 par, 20,000 shares authorized, 4,000 shares issued and

outstanding $4,000

Additional Paid-In Capital 20,000

Retained Earnings 50,000

The market price of Druthers' stock was $8 per share at December 31, 2010.

A) What journal entry will be required to record the distribution of a 20% stock dividend

on December 31, 2010?

B) What balance will be in the retained earnings account immediately following the stock

dividend?

C) Prepare the stockholders' equity section of Druthers' balance sheet

Problem 5

Consider the following information from the financial statements of Hester Mining, Inc.:

2010 2009

Preferred Stock $ 6,500 6,040

Total Stockholders' Equity 69,500 65,200

Net Income 20,402

Market price per share 93

Common Dividends 621

Preferred Dividends 190

Purchases of Treasury Stock 5,060

Average Common Shares Outstanding 800Dividends per share 0.78

Calculate the following financial ratios for Hester Mining

A) Return on equity

B) Earnings per share

C) Dividend yield

D) Dividend payout