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Chapter 15: Question 7BE (page 811)
Hinges Corporation issued 500 shares of \(100 par value preferred stock for \)61,500. Prepare Hinges journal entry.
In Hinges鈥� book, the cash account should be debited with the credit account of preferred stock and paid-in capital in excess of par preferred stock.
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Teller Corporation鈥檚 post-closing trial balance at December 31, 2017, was as follows.
TELLER CORPORATION POST-CLOSING TRIAL BALANCE DECEMBER 31, 2017 | ||
Dr. | Cr. | |
Accounts payable | \( 310,000 | |
Accounts receivable | \) 480,000 | |
Accumulated depreciation鈥攂uilding and equipment | 185,000 | |
Allowance for doubtful accounts | 30,000 | |
Bonds payable | 700,000 | |
Building and equipment | 1,450,000 | |
Cash | 190,000 | |
Dividends payable on preference shares鈥攃ash | 4,000 | |
Inventories | 560,000 | |
Land | 400,000 | |
Prepaid expenses | 40,000 | |
Retained earnings | 201,000 | |
Share capital鈥攐rdinary (\(1 par value) | 200,000 | |
Share capital鈥攑reference (\)50 par value) | 500,000 | |
Share premium鈥攐rdinary | 1,000,000 | |
Share premium鈥攖reasury | 160,000 | |
Treasury shares鈥攐rdinary at cost | 170,000 |
|
Totals | \(3,290,000 | \)3,290,000 |
On December 31, 2017, Teller had the following number of ordinary and preference shares.
Ordinary | Preference | |
Authorized | 600,000 | 60,000 |
Issued | 200,000 | 10,000 |
Outstanding | 190,000 | 10,000 |
The dividends on preference shares are \(4 cumulative. In addition, the preference shares have a preference in the liquidation of \)50 per share.
Instructions
Prepare the equity section of Teller鈥檚 statement of financial position at December 31, 2017.
(Treasury Stock Transactions and Presentation) Clemson Company had the following stockholders鈥� equity as of January 1, 2017
Common stock, \(5 par value, 20,000 shares issued \)100,000
Paid-in capital in excess of par鈥攃ommon stock 300,000
Retained earnings 320,000
Total stockholders鈥� equity \(720,000
During 2017, the following transactions occurred.
Feb.1 Clemson repurchased 2,000 shares of treasury stock at a price of \)19
per share.
Mar.1 800 shares of treasury stock repurchased above were reissued at \(17
per share.
Mar.18 500 shares of treasury stock repurchased above were reissued at \)14
per share.
Apr. 22 600 shares of treasury stock repurchased above were reissued at \(20
per share.
Instructions
Pistons Inc. recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation鈥檚 capital stock.
S.no. | Particular | Folio | Debit \( | Credit \) |
May 2 | Cash | 192,000 | ||
Capital Stock | 192,000 | |||
(Issued 12,000 shares of \(5 par value common stock at \)16 per share) | ||||
May 10 | Cash | 600,000 | ||
| Capital Stock | 600,000 | ||
(Issued 10,000 shares of \(30 par value preferred stock at \)60 per share) | ||||
May 15 | Capital Stock | 15,000 | ||
Cash | 15,000 | |||
(Purchased 1,000 shares of common stock for the treasury at \(15 per share) | ||||
May 31 | Cash | 8,500 | ||
Capital Stock | 5,000 | |||
Gain on Sale of Stock | 3,500 | |||
(Sold 500 shares of treasury stock at \)17 per share) |
Instructions
On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.
This comment appeared in the annual report of MacCloud Inc.: 鈥淭he Company could pay cash or property dividends on the Class A common stock without paying cash or property dividends on the Class B common stock. But if the Company pays any cash or property dividends on the Class B common stock, it would be required to pay at least the same dividend on the Class A common stock.鈥� How is a property dividend accounted for in the financial records?
(Stock Dividends and Stock Split) Oregon Inc. \(10 par common stock is selling for \)110 per share. Four million shares are currently issued and outstanding. The board of directors wishes to stimulate interest in Oregon common stock before a forthcoming stock issue but does not wish to distribute capital at this time. The board also believes that too many adjustments to the stockholders鈥� equity section, especially retained earnings, might discourage potential investors. The board has considered three options for stimulating interest in the stock:
The board has considered three options for stimulating interest in the stock:
Instructions
Acting as financial advisor to the board, you have been asked to report briefly on each option and, considering the board鈥檚 wishes, make a recommendation. Discuss the effects of each of the foregoing options.
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