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Chapter 13: 8RQ (page 707)
What account is used to record the premium when issuing common stock? What type of account is this?
Paid-In Capital in Excess of Par is used to record the premium when issuing common stock and is an equity account.
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Where and how is treasury stock reported on the balance sheet?
Journalizing dividend and treasury stock transactions, preparing a statement of retained earnings, and preparing stockholders鈥� equity
The balance sheet of Goldstein Management Consulting, Inc. at December 31, 2017, reported the following stockholders鈥� equity:
Common Stock鈥擻(10 Par Value; 350,000 shares
authorized, 32,000 shares issued and outstanding
Paid-In Capital:
160,000
\) 320,000
650,000
Retained Earnings
Total Stockholders鈥� Equity \( 810,000
Stockholders鈥� Equity
Paid-In Capital in Excess of Par鈥擟ommon 330,000
Total Paid-In Capital
During 2018, Goldstein completed the following selected transactions:
Feb. 6 Declared a 15% stock dividend on common stock. The market value of
Goldstein鈥檚 stock was \)25 per share.
15 Distributed the stock dividend.
Jul. 29 Purchased 2,300 shares of treasury stock at \(25 per share.
Nov. 27 Declared a \)0.10 per share cash dividend on the common stock outstanding.
Requirements
2. Prepare a retained earnings statement for the year ended December 31, 2018. Assume Goldstein鈥檚 net income for the year was $90,000.
London Corporation has two classes of stock: Common, \(1 par value; and Preferred, \)4 par value. Journalize the issuance of 10,000 shares of common stock for $8 per share.
Journalizing issuance of stock
Steller Systems completed the following stock issuance transactions:
May 19 Issued 1,700 shares of \(3 par value common stock for cash of \)10.50 per share.
Jun. 3 Issued 300 shares of \(9, no-par preferred stock for \)15,000 cash.
11 Received equipment with a market value of \(68,000 in exchange for 5,000 shares of the \)3 par value common stock.
Requirements
2. How much paid-in capital did these transactions generate for Steller Systems?
Computing earnings per share, price/earnings ratio, and rate of return on common stockholders鈥� equity
Bianchi Company reported these figures for 2018 and 2017:
2018 2017
Income Statement鈥攑artial:
Net Income \( 34,380 \) 18,000
Dec. 31, 2018 Dec. 31, 2017
Balance Sheet鈥攑artial:
Total Assets \( 285,000 \) 280,000
Paid-In Capital:
Preferred Stock鈥�11%, \(9 Par Value; 60,000 shares
authorized, 12,000 shares issued and outstanding
\) 108,000 \( 108,000
Common Stock鈥擻)2 Par Value; 60,000 shares
authorized, 50,000 shares issued and outstanding
100,000 100,000
Paid-In Capital in Excess of Par鈥擟ommon 14,000 14,000
Retained Earnings 60,500 38,000
Total Stockholders鈥� Equity \( 282,500 \) 260,000
Requirements
3. Compute Bianchi Company鈥檚 rate of return on common stockholders鈥� equity for 2018. Assume the company paid the minimum preferred dividend during 2018. Round to the nearest whole percent.
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