Week 4
Brief Exercise 13-4
On June 1, Noonan Inc. issues 4,000 shares of no-par common stock at a cash price of $6 per share. Journalize the issuance of the shares assuming the stock has a stated value of $1 per share. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Cash = Issues shares x cash price = 4,000 x 6 = 24,000
Common Stock = Issues shares x stated value = 4,000 x 1 = 4,000
Paid-in Capital in Excess of Stated Value—Common Stock = 4,000 x 5(6-1) = 20,000
Account titles and explanationDebtCreditCash24,000 Common Stock 4,000Paid-in Capital in Excess of Stated Value—Common Stock 20,000
Brief Exercise 13-7
Garb Inc. issues 5,000 shares of $100 par value preferred stock for cash at $130 per share. Journalize the issuance of the preferred stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Cash =5,000 x 130 = 650,000
Preferred stock =5,000 x 100 = 500,000
Paid-in Capital in Excess of Par—Preferred Stock =5,000 x 30(130-100) = 150,000
Account titles and explanationDebtCreditCash650,000 Common Stock 500,000Paid-in Capital in Excess of Par-Preferred Stock 150,000
Brief Exercise 13-8
Pine Corporation has the following accounts at December 31: Common Stock, $10 par, 5,000 shares issued, $50,000; Paid-in Capital in Excess of Par—Common Stock $30,000; Retained Earnings $45,000; and Treasury Stock, 500 shares, $11,000.
Prepare the stockholders’ equity section of the balance sheet. (Enter the account name only and do not provide the descriptive information provided in the question.)
Common stock, $10 par value, 5,000 shares issued and 4,500 shares outstanding = 5000 x 10 = 50,000
Treasury stock (500 common shares) = 11,000
Pine Corporation balance sheet December 31Stockholders’ equity Paid-in Capital Capital Stock Common Stock50,000Additional Paid-in Stock Paid-in Capital in Excess of Par—Common Stock30,000Total paid in Capital = 50,000 + 30,000 =80,000Retained Earnings4,500Total paid in Capital and Retained Earnings = 80,000 + 45,000(4,500 x 10) =125,000LessTreasury Stock11,000? Total Stockholders’ equity = 125,000 -11,000 = 114,000
Exercise 13-2
Andrea has prepared the following list of statements about corporations.Identify each statement as true or false.
1. Corporation management is both an advantage and a disadvantage of a corporation compared to a proprietorship or a partnership. True
2. Limited liability of stockholders, government regulations, and additional taxes are the major disadvantages of a corporation. False
3. When a corporation is formed, organization costs are recorded as an asset. = False
4. Each share of common stock gives the stockholder the ownership rights to vote at stockholder meetings, share in corporate earnings, keep the same percentage ownership when new shares of stock are issued, and share in assets upon liquidation. True
5. The number of issued shares is always greater than or equal to the number of authorized shares. False
6. A journal entry is required for the authorization of capital stock. False
7. Publicly held corporations usually issue stock directly to investors. False
8. The trading of capital stock on a securities exchange involves the transfer of already issued shares from an existing stockholder to another investor. True
9. The market price of common stock is usually the same as its par value. False
10. Retained earnings are the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock. False
Exercise 13-4
Osage Corporation issued 2,000 shares of stock. Prepare the entry for the issuance under the following assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
a) The stock had a par value of $5 per share and was issued for a total of $52,000.
b) The stock had a stated value of $5 per share and was issued for a total of $52,000.
c) The stock had no par or stated value and was issued for a total of $52,000.
d) The stock had a par value of $5 per share and was issued to attorneys for services during incorporation valued at $52,000.
e) The stock had a par value of $5 per share and was issued for land worth $52,000.
Common Stock = 2,000 x 5 = 10,000
a)
Account titles and explanationDebtCreditCash52,000 Common Stock 10,000Paid-in Capital in Excess of Par-Common Stock = 52,00 – 10,000 = 42,000
b)
Account titles and explanationDebtCreditCash52,000 Common Stock 10,000Paid-in Capital in Excess of Stated Value-Common Stock = 52,00 – 10,000 = 42,000
c)
Account titles and explanationDebtCreditCash52,000 Common Stock 52,000
d)
Account titles and explanationDebtCreditOrganization Expense52,000 Common Stock 10,000Paid-in Capital in Excess of Stated Value-Common Stock = 52,00 – 10,000 = 42,000
e)
Account titles and explanationDebtCreditLand52,000 Common Stock 10,000Paid-in Capital in Excess of Stated Value-Common Stock = 52,00 – 10,000 = 42,000
Exercise 13-7 (Part level Submission
On January 1, 2014, the stockholders’ equity section of Newlin Corporation shows common stock ($5 par value) $1,500,000; paid-in capital in excess of par $1,000,000; and retained earnings $1,200,000. During the year, the following treasury stock transactions occurred.
Mar. 1 Purchased 50,000 shares for cash at $15 per share.
July. 1 Sold 10,000 treasury shares for cash at $17 per share.
Sept.1 Sold 8,000 treasury shares for cash at $14 per share.
a) Journalize the treasury stock transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Mar. 1
Account titles and explanationDebtCreditTreasury Stock750,000 Cash 750,000
Treasury Stock = 50,000 ×15 =750,000
July. 1
Account titles and explanationDebtCreditCash170,000 Treasury Stock 150,000Paid-in Capital from Treasury Stock 20,000
Cash = 10,000 × 17 = 170,000
Treasury Stock =10,000 × 15 = 150,000
Paid-in Capital from Treasury Stock =10,000 × 2 = 20,000
Sept.1
Account titles and explanationDebtCreditCash112,000 Paid-in Capital from Treasury Stock8,000 Treasury Stock 120,000
Cash = 8,000 × 14 =112,000
Treasury Stock =8,000 × 15= 120,000
Paid-in Capital from Treasury Stock =8,000 × 1= 8,000
b) Restate the entry for September 1, assuming the treasury shares were sold at $12 per share. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Sept.1
Account titles and explanationDebtCreditCash96000 Paid-in Capital from Treasury Stock20,000 Retained Earnings4,000 Treasury Stock 120000
Cash = 8,000 × 12 =96000
Treasury Stock =8,000 × 15= 120,000
Problem 13-1A (Part level Submission)
DeLong Corporation was organized on January 1, 2014. It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 500,000 shares of no-par common stock with a stated value of $2 per share. The following stock transactions were completed during the first year.
Jan. 10 Issued 80,000 shares of common stock for cash at $4 per share.
Mar. 1 Issued 5,000 shares of preferred stock for cash at $105 per share.
Apr. 1 Issued 24,000 shares of common stock for land. The asking price of the land was $90,000. The fair value of the land was $85,000.
May. 1 Issued 80,000 shares of common stock for cash at $4.5 per share.
Aug. 1 Issued 10,000 shares of common stock to attorneys in payment of their bill of $30,000 for services performed in helping the company organize.
Sept. 1 Issued 10,000 shares of common stock for cash at $5 per share.
Nov. 1 Issued 1,000 shares of preferred stock for cash at $109 per share.
A) Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Jan. 10
Account titles and explanationDebtCreditCash =80,000 x 4320,000 Common stock =80,000 x 2 ($4-$2) 160,000Paid-in Capital in Excess of Stated Value-Common Stock = 80,000 x 2 160,000
Mar. 1
Account titles and explanationDebtCreditCash525000 Preferred stock 500,000Paid-in Capital in Excess of Par-Preferred Stock 25,000
Cash = 5,000 x 105 =525000
Preferred Stock = 5,000 x 100 =500,000
Paid-in Capital in Excess of Par-Preferred Stock = 5,000 x 5 =25,000
Apr. 1
Account titles and explanationDebtCreditLand85,000 Common stock 48,000Paid-in Capital in Excess of Stated Value-Common Stock 37,000
Common Stock = 24,000 x 2 =48,000
Paid-in Capital in Excess of Stated Value-Common Stock =85,000 – 48,000 =37,000
May. 1
Account titles and explanationDebtCreditCash360,000 Common stock 160,000Paid-in Capital in Excess of Stated Value-Common Stock 200,000
Cash = 80,000 x 4.5 = 360,000
Common Stock = 80,000 x 2 = 160,000
Paid-in Capital in Excess of Stated Value-Common Stock = 80,000 x 2.50 =200,000
Aug. 1
Account titles and explanationDebtCreditOrganization Expense30,000 Common stock 20,000Paid-in Capital in Excess of Stated Value-Common Stock 10,000
Common Stock =10,000 x 2 = 20,000
Paid-in Capital in Excess of Stated Value-Common Stock = 30,000 – 20,000 =10,000
Sept. 1
Account titles and explanationDebtCreditCash50,000 Common stock 20,000Paid-in Capital in Excess of Stated Value-Common Stock 30,000
Cash = 10,000 x 5 = 50,000
Common Stock = 10,000 x 2= 20,000
Paid-in Capital in Excess of Stated Value-Common Stock = 10,000 x 3 = 30,000
Nov. 1
Account titles and explanationDebtCreditCash109,000 Preferred Stock 100,000Paid-in Capital in Excess of Par-Preferred Stock 9,000
Cash = 1,000 x 109=109,000
Preferred Stock = 1,000 x 100=100,000
Paid-in Capital in Excess of Par-Preferred Stock = 1,000 x 9=9,000
B) Post to the stockholders’ equity accounts. (Post entries in the order of journal entries presented in the previous part.)
Preferred Stock
DateDebtCreditBalanceMar. 1 500,000500,000Nov. 1 100,000600,000
Common Stock
DateDebtCreditBalanceJan. 10 160,000160000Apr. 1 48,000208,000May. 1 160,000368,000Aug. 1 20,000388,000Sept. 1 20,000408,000
Paid-in Capital in Excess of Par-Preferred Stock
DateDebtCreditBalanceMar. 1 25,00025,000Nov. 1 9,00034,000
Paid-in Capital in Excess of Stated Value-Common Stock
DateDebtCreditBalanceJan. 10 160,000160000Apr. 1 37000197,000May. 1 200,000397,000Aug. 1 10,000407,000Sept. 1 30,000437,000
C)Prepare the paid-in capital section of stockholders’ equity at December 31, 2014. (Enter the account name only and do not provide the descriptive information provided in the question.)
DeLong Corporation Balance sheet (partial) December 31, 2014
Paid-in capital Capital stock Preferred Stock 600,000Common Stock 408,000Total Capital stock 1008000 Additional Paid-in capital Paid-in Capital in Excess of Stated Value-Common Stock437,000 Paid-in Capital in Excess of Par-Preferred Stock34,000 Total Additional Paid-in capital 471,000 Total Paid-in Capital 1479,000
Brief Exercise 13-3
On May 10, Jack Corporation issues 3,400 shares of $12 par value common stock for cash at $22 per share. Journalize the issuance of the stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
May. 1
Account titles and explanationDebtCreditCash74,800 Common stock 40,800Paid-in Capital in Excess of Par-Common
Stock 34,000
Cash = 3,400 x 22 = 74,800
Common Stock = 3,400 x 12 = 40,800
Paid-in Capital in Excess of Par-Common Stock = 3,400 x 10(22-12) = 34,000
Brief Exercise 13-5
Lei Inc.’s $11 par value common stock is actively traded at a market price of $16 per share. Lei issue 4,900 shares to purchase land advertised for sale at $74,980. Journalize the issuance of the stock in acquiring the land. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account titles and explanationDebtCreditLand74,800 Common stock 53900Paid-in Capital in Excess of Par-Common Stock 24,500
Cash = 74,980
Common Stock = 4,900 x 11 = 53900
Paid-in Capital in Excess of Par-Common Stock = 4,900 x 6(16-11) = 24,500
Brief Exercise 13-6
On July 1, Raney Corporation purchases 590 shares of its $6 par value common stock for the treasury at a cash price of $9 per share. On September 1, it sells 300 shares of the treasury stock for cash at $13 per share.
Journalize the two treasury stock transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
July 1
Account titles and explanationDebtCreditTreasury stock5310 Cash 5310
Treasury stock = 590 x 9 =5,310
September 1
Account titles and explanationDebtCreditCash3,900 Treasury stock 2700Paid-in Capital from Treasury Stock 1200
Cash = 300 x 13 = 3,900
Treasury Stock = 300 x 9 = 2,700
Paid-in Capital from Treasury Stock = 300 x 4(13-9) =1200
Exercise 13-3
During its first year of operations, Foyle Corporation had the following transactions pertaining to its common stock.
Jan. 10 Issued 66,400 shares for cash at $6 per share.
July. 1 Issued 42,500 shares for cash at $8 per share
A) Journalize the transactions, assuming that the common stock has a par value of $6 per share. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Jan. 10
Account titles and explanationDebtCreditCash398,400 Common Stock 398,400
Cash = 66,400 x 6 = 398,400
July 1
Account titles and explanationDebtCreditCash340,000 Common Stock 255,000Paid-in Capital in Excess of Par-Common Stock 85,000
Cash = 42,500 x 8= 340,000
Common Stock = 42,500 x 6 = 255,000
Paid-in Capital in Excess of Par-Common Stock = 42,500 x 2(8-6) =85,000
B) Journalize the transactions, assuming that the common stock is no-par with a stated value of $1 per share. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Jan. 10
Account titles and explanationDebtCreditCash398,400 Common Stock 66400Paid-in Capital in Excess of Stated Value-Common Stock 332000
Cash = 66,400 x 6 = 398,400
Common Stock = 66,400 x 1 = 66,400
Paid-in Capital in Excess of Stated Value-Common Stock = 66,400 x 5(6-1) = 332000
Jul. 1
Account titles and explanationDebtCreditCash340,000 Common Stock 42,500Paid-in Capital in Excess of Stated Value-Common Stock 29,7500
Cash = 42,500 x 8= 340,000
Common Stock = 42,500 x 1 = 42,500
Paid-in Capital in Excess of Stated Value-Common Stock = 42,500 x 7(8-1) = 29,7500
Exercise 13-5
Quay Co. had the following transactions during the current period.
Mar. 2 Issued 5,300 shares of $5 par value common stock to attorneys in payment of a bill for $32,500 for services performed in helping the company to incorporate.
Jun. 12 Issued 55,400 shares of $5 par value common stock for cash of $345,000.
Jul. 11 Issued 1,600 shares of $110 par value preferred stock for cash at $140 per share.
Nov. 28 Purchased 1,700 shares of treasury stock for $79,700.
Journalize the transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Mar. 2.
Account titles and explanationDebtCreditOrganization Expense32,500 Common Stock 26,500Paid-in Capital in Excess of Par-Common Stock 6,000
Common Stock = 5,300 x 5 =26,500
Jun. 12
Account titles and explanationDebtCreditCash345,000 Common Stock 277,000Paid-in Capital in Excess of Par-Common Stock 68,000
Common Stock = 55,400 x 5 = 277,000
Jul. 11
Account titles and explanationDebtCreditCash224,000 Preferred Stock 176,000Paid-in Capital in Excess of Par-Preferred Stock 48,000
Cash = 1,600 x 140 = 224,000
Preferred Stock = 1,600 x 110 = 176,000
Paid-in Capital in Excess of Par-Preferred Stock = 1,600 x 30(140-110) = 48,000
Nov. 28
Account titles and explanationDebtCreditTreasury Stock79,700 Cash 79,700
Exercise 13-8
Rinehart Corporation purchased from its stockholders 5,700 shares of its own previously issued stock for $279,300. It later resold 1,900 shares for $52 per share, then 1,900 more shares for $47 per share, and finally 1,900 shares for $41 per share.
Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
To record purchase from stockholders
Account titles and explanationDebtCreditTreasury Stock279,300 Cash 279,300
To record sales of shares at $52 per share
Account titles and explanationDebtCreditCash98,800 Treasury Stock 93,100Paid-in Capital from Treasury Stock 5,700
Cash = 1,900 x 52 = 98,800
Treasury Stock = 1,900 x 49 = 93,100
To record sales of shares at $47 per share
Account titles and explanationDebtCreditCash89,300 Paid-in Capital from Treasury Stock3,800 Treasury Stock 93,100
Cash = 1,900 x $47= 89,300
Treasury Stock = 1,900 x 49 = 93,100
To record sales of shares at $41 per share
Account titles and explanationDebtCreditRetained Earnings13,300 Paid-in Capital from Treasury Stock1,900 Cash77,900 Treasury Stock 93,100
Cash = 1,900 x $41=77,900
Paid-in Capital from Treasury Stock = 5,700 – $3,800 = 1,900
Treasury Stock = 1,900 x 49 = 93,100
Problem 13-2A
Fechter Corporation had the following stockholders’ equity accounts on January 1, 2014: Common Stock ($4 par) $405,680, Paid-in Capital in Excess of Par Common Stock $178,180, and Retained Earnings $101,940. In 2014, the company had the following treasury stock transactions.
Mar. 1 Purchased 6,570 shares at $9 per share
June 1 Sold 1,480 shares at $13 per share.
Sept. 1 Sold 1,590 shares at $11 per share.
Dec. 1 Sold 1,240 shares at $6 per share.
Fechter Corporation uses the cost method of accounting for treasury stock. In 2014, the company reported net income of $29,080.
A) Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2014, for net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.
Mar. 1
Account titles and explanationDebtCreditTreasury Stock59130 Cash 59130
Treasury Stock = 6,570 x 9 = 59130
June 1
Account titles and explanationDebtCreditCash19,240 Treasury Stock 13,320 Paid-in Capital from Treasury Stock 5920
Cash = 1,480 x 13= 19,240
Treasury Stock = 1,480 x 9 = 13,320
Paid-in Capital from Treasury Stock = 1,480 x 4(13-9) = 5920
Sept. 1
Account titles and explanationDebtCreditCash17,490 Treasury Stock 14,310 Paid-in Capital from Treasury Stock 3,180
Cash = 1,590 x 11 = 17,490
Treasury Stock = 1,590 x 9 = 14,310
Paid-in Capital from Treasury Stock = 1,590 x 2(11-9) = 3,180
Dec. 1
Account titles and explanationDebtCreditCash7,440 Paid-in Capital from Treasury Stock3720 Treasury Stock 11,160
Cash = 1,240 x 6 = 7,440
Paid-in Capital from Treasury Stock = 1,240 x 3 (9-6) = 3,720
Treasury Stock = 1,240 x 9 = 11,160
Dec. 31
Account titles and explanationDebtCreditIncome Summary29,080 Retained Earnings 29,080
B) Open accounts for Paid-in Capital from Treasury Stock, Treasury Stock, and Retained Earnings. Post to these accounts using J10 as the posting reference. (Post entries in the order of journal entries presented in the previous part.)
Paid-in Capital from Treasury Stock
DateExplanation RefDebtCreditBalanceJune 1 J10 59205920Sept. 1J10 31809,100Dec. 1J103,720 5,380
Treasury Stock
DateExplanation RefDebtCreditBalanceMar. 1 J1059130 59130June 1 J10 1332045,810Sept. 1J10 1431031,500Dec. 1J10 1116020,340
Retained Earnings
DateExplanation RefDebtCreditBalanceJan. 1 ü 101,940Dec. 1 J10 29,080131020
C) Prepare the stockholders’ equity section for Fechter Corporation at December 31, 2014. (Enter the account name only and do not provide the descriptive information provided in the question.)
Fechter Corporation Balance sheet (partial) December 31, 2014
Stockholders’ equity Paid-in Capital Capital Stock Common Stock 405,680 Additional Paid-in Capital Paid-in Capital in Excess of Par-Common Stock178,180 Paid-in Capital from Treasury Stock5380 Total Additional Paid-in Capital 183,560Total Paid-in Capital 589,240 Retained Earnings Total paid in Capital and Retained Earnings 720,260LessTreasury Stock 20,340Total Stockholders’ equity = 125,000 -11,000 = 699,920
Stockholders’ equity Paid-in capital Capital stock Common stock, $4 par, 101,420 shares issued and 99,160 outstanding $405,680 Additional paid-in capital Paid-in Capital in Excess of Par-Common Stock $178,180 Paid-in Capital from Treasury 5,380 Total additional paid-in capital 183,560 Total paid-in capital 589,240 Retained earnings 131,020 Total paid-in capital and retained earnings 720,260 Less: Treasury stock (2,260 common shares, at cost) (20,340)Total stockholders’ equity $699,920
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