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Chapter 13: Q19RQ (page 707)
What is reported in the discontinued operations section of the income statement?
Discontinued operations ought to be accounted on the income statement: net tax underneath income from continuing operations.
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Computing earnings per share and price/earnings ratio
Rocket Corp. earned net income of \(153,040 and paid the minimum dividend to preferred stockholders for 2018. Assume that there are no changes in common shares outstanding during 2018. Rocket鈥檚 books include the following figures:
Preferred Stock鈥�6%, \)60 par value; 2,000 shares authorized, 1,000
shares issued and outstanding \( 60,000
Common Stock鈥擻)5 par value; 80,000 shares authorized, 48,000 shares
issued, 46,700 shares outstanding 240,000
Paid-In Capital in Excess of Par鈥擟ommon 470,000
Treasury Stock鈥擟ommon; 1,300 shares at cost (26,000)
Requirements
1. Compute Rocket鈥檚 EPS for the year.
What is treasury stock? What type of account is Treasury Stock, and what is the account鈥檚 normal balance?
Journalizing a stock dividend and reporting stockholders鈥� equity
The stockholders鈥� equity of Lakeside Occupational Therapy, Inc. on December 31, 2017, follows:
Common Stock鈥擻(1 Par Value; 1,200 shares
authorized, 400 shares issued and outstanding
Paid-In Capital:
120,000
400
2,000
Retained Earnings
Total Stockholders鈥� Equity \) 122,000
Stockholders鈥� Equity
Paid-In Capital in Excess of Par鈥擟ommon 1,600
Total Paid-In Capital
\(
On April 30, 2018, the market price of Lakeside鈥檚 common stock was \)16 per share and the company declared a 13% stock dividend. The stock was distributed on May 15.
Requirements
1. Journalize the declaration and distribution of the stock dividend.
Analyzing the effect of prior-period adjustments
Taylor Corporation discovered in 2019 that it had incorrectly recorded in 2018 a cash payment of \(70,000 for utilities expense. The correct amount of the utilities expense was \)35,000.
Requirements
2. How should this error be reported in the 2019 financial statements?
A Identifying sources of equity, stock issuance, and dividends
Voyage Comfort Specialists, Inc. reported the following stockholders鈥� equity on its balance sheet at June 30, 2018:
Preferred Stock鈥�7%, ? Par Value; 625,000 shares
authorized, 280,000 shares issued and outstanding
Paid-In Capital:
\( 1,400,000
1,340,000
Stockholders鈥� Equity
Paid-In Capital in Excess of Par鈥擟ommon 2,900,000
Total Paid-In Capital 5,640,000
Retained Earnings 12,000,000
Total Stockholders鈥� Equity \) 17,640,000
Common Stock鈥�$1 Par Value; 3,000,000 shares
authorized, 1,340,000 shares issued and outstanding
Requirements
3. Make two summary journal entries to record issuance of all the Voyage Comfort Specialists鈥� stock for cash. Explanations are not required.
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