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Brief Exercise 15-4

Ravonette Corporation issued 375 shares of $15 par value common stock and 110 shares of $48 par value preferred stock for a lump sum of $20,025. The common stock has a market price of $30 per share, and the preferred stock has a market price of $100 per share. Prepare the journal entry to record the issuance. (Round answers to 0 decimal places, e.g., 1520. 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.)

Account Titles and Explanation	Debit	Credit
Cash	20025
Preferred Stock
Paid-in Capital in Excess of Par - Preferred Stock
Common Stock
Paid-in Capital in Excess of Par - Common Stock

Exercise 15-12

Lotoya Davis Corporation has 10.12 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 62 cents per share cash dividend to stockholders of record as of June 14, payable June 30. (a) Prepare the journal entry for each of the dates above assuming the dividend represents a distribution of earnings. (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.)

Date	Account Titles and Explanation	Debit	Credit
6/1

6/14

6/30

(b) How would the entry differ if the dividend were a liquidating dividend? (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.)

Account Titles and Explanation	Debit	Credit

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Exercise 15-19

Shown below is the liabilities and stockholders’ equity section of the balance sheet for Jana Kingston Company and Mary Ann Benson Company. Each has assets totaling $4,418,100.

Jana Kingston Co.	Mary Ann Benson Co.
Current liabilities	$315,600	Current liabilities	$754,600
Long-term debt, 10%	1,281,000	Common stock ($20 par)	2,945,000
Common stock ($20 par)	2,103,000	Retained earnings (Cash dividends, $328,900)	718,500
Retained earnings (Cash dividends, $227,700)	718,500
	$4,418,100		$4,418,100

For the year, each company has earned the same income before interest and taxes.

	Jana Kingston Co.	Mary Ann Benson Co.
Income before interest and taxes	$1,203,000	$1,203,000
Interest expense	128,100	0
	1,074,900	1,203,000
Income taxes (45%)	483,705	541,350
Net income	$591,195	$661,650

At year end, the market price of Kingston’s stock was $101 per share, and Benson’s was $63.50. Assume balance sheet amounts are representative for the entire year. (a) Calculate the return on total assets? (Round answers to 2 decimal places, e.g. 16.85%.)

	Return on total assets
Kingston Company		%
Benson Company		%

Which company is more profitable in terms of return on total assets? (b) Calculate the return on common stock equity? (Round answers to 2 decimal places, e.g. 16.85%.)

	Return on common stock equity
Kingston Company		%
Benson Company		%

Which company is more profitable in terms of return on common stock equity? (c) Calculate the Net income per share. (Round answers to 2 decimal places, e.g. $6.85.)

		Net income per share
Kingston Company		$
Benson Company		$

Which company has the greater net income per share of stock? Neither company issued or reacquired shares during the year. (d1) From the point of view of net income, is it advantageous to the stockholders of Jana Kingston Co. to have the long-term debt outstanding? (e) What is the book value per share for each company? (Round answers to 2 decimal places, e.g. $6.85.)

		Book value per share
Kingston Company		$
Benson Company		$

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Problem 15-3

Hatch Company has two classes of capital stock outstanding: 8%, $20 par preferred and $5 par common. At December 31, 2014, the following accounts were included in stockholders’ equity.

Preferred Stock, 155,900 shares		$ 3,118,000
Common Stock, 2,023,000 shares		10,115,000
Paid-in Capital in Excess of Par—Preferred Stock		204,300
Paid-in Capital in Excess of Par—Common Stock		28,050,000
Retained Earnings		4,507,000

The following transactions affected stockholders’ equity during 2015.

Jan. 1		31,500 shares of preferred stock issued at $23 per share.
Feb. 1		59,400 shares of common stock issued at $21 per share.
June 1		2-for-1 stock split (par value reduced to $2.50).
July 1		37,000 shares of common treasury stock purchased at $9 per share. Hatch uses the cost method.
Sept. 15		10,000 shares of treasury stock reissued at $10 per share.
Dec. 31		The preferred dividend is declared, and a common dividend of 50¢ per share is declared.
Dec. 31		Net income is $2,292,000.

Prepare the stockholders’ equity section for Hatch Company at December 31, 2015. (Enter account name only and do not provide descriptive information.)

HATCH COMPANY Stockholders’ Equity December 31, 2015
EAT_1363776507149_0_503989536147669_004
Preferred Stock		$
Common Stock
EAT_1363776507149_0_503989536147669_049
EAT_1363776507149_0_503989536147669_066
Paid-in Capital in Excess of Par - Preferred Stock	$
Paid-in Capital in Excess of Par - Common Stock
Treasury Stock

EAT_1363776507149_0_503989536147669_128
Retained Earnings
EAT_1363776507149_0_503989536147669_162
EAT_1363776507149_0_503989536147669_170: Treasury Stock
EAT_1363776507149_0_503989536147669_201		$

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Exercise 15-4

Faith Evans Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ. Faith Evans Corp. has issued 10,370 units. Each unit consists of a $519 par, 12% subordinated debenture and 10 shares of $5 par common stock. The investment banker has retained 415 units as the underwriting fee. The other 9,955 units were sold to outside investors for cash at $913 per unit. Prior to this sale, the 2-week ask price of common stock was $41 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value. (a) Prepare the journal entry to record Evans’ transaction, under the following conditions. (Round answers to 0 decimal places, e.g. $38,487. 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.)

(1)		Employing the incremental method.
(2)		Employing the proportional method, assuming the recent price quote on the common stock reflects fair value.

No.	Account Titles and Explanation	Debit	Credit
1.	Unamortized Bond Issue Costs
	Cash
	Bonds Payable
	Common Stock
	Paid-in Capital in Excess of Par - Preferred Stock
2.	Cash
	Unamortized Bond Issue Costs
	Discount on Bonds Payable
	Bonds Payable
	Common Stock
	Paid-in Capital in Excess of Par - Common Stock

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