• 250 outof250points(100%)

1 . sward: 10 out of 10.00

·····························poinrs ··· July 15 August 15 August 31

Declared a cash dividend payable to common stockholders of $165,000. Date of record is August 15 for the cash dividend declared on July 15. Paid the dividend declared on July 15.

Prepare journal entries to record the above transactions for Emerson Corporation. (If no journal entry is required, select "No journal entry required" in the first account field.)

Date

Jul 15

Aug 15

Aug 31 1--

General Journal Retained earnings

Common dividend payable

No journal entry required

Common dividend payable

Gash

Debit Credit

./ 165,000./

./ 165,000./

./

./ 165,000./

./ 165,000./

2. sward: 10 out of 10.00

·····························poinrs ··· Foxburo Company expects to pay a $2.34 per share cash dividend this year on its common stock. The current market value of Foxburo stock is $32.50 per share.

Compute the expected dividend yield on the Foxburo stock.

Dividend Yield

Choose Numerator: Choose Denominator:

Annual cash dividends per share ./ Market value per share ./

$ 2.34./ $ 32.50./

Dividend Yield

Dividend Yield

7.2%

g.vard:

3 10 out of . 10.00

··· · · · · · ·points· a. Prepare the journal entry to record Zende Company's issuance of 75,000 shares of $5 par value

common stock assuming the shares sell for $5 cash per share.

Event General Journal Debit Credit

1 Cash ./ 375,000./

Common Stock, $5 Par Value ./ 375,000./

b. Prepare the journal entry to record Zende Company's issuance of 75,000 shares of $5 par value common stock assuming the shares sell for $6 cash per share.

Event

1

General Journal

Cash

Common stock, $5 par value ./

Paid-in capital in excess of par value, common stock ./

Debit

450,000./

Credit

375,000./

75,000./

4. 8'1Nard: 10 out of 10.00

The stockholders' equi~/ section of Montel Company's balance sheet follows. The preferred stock's call price is $40.

Preferred stock- 5% cumulative, $10 par value, 20,000 shares authorized, issued and outstanding $

Common stock- $5 par value, 200,000 shares authorized, 150,000 shares issued and outstanding

Retained earnings

200,000

750,000 900,000

Total stockholders' equi~/ $ 1,850,000

Determine the book value per share of the common stock.

Book Value Per Coomon Share

Choose Numerator: Choose Denominator: Book Value Per Conmon Share

Stockholders' equity applicable to common shares ./ I ; Number of common shares outstanding ./ = I Book Value Per Common Share +----> - -

$ 1,050,000./ I I$ 150,000./ _= ~~$ 7.00

5. award: 10 out of 10.00

The equi~/ section of Cyril Corporation's balance sheet shows the following.

Preferred stock-{)% cumulative, $25 par value, $30 call price, 10,000 shares issued and outstanding

Common stock- $1 O par value, 80,000 shares issued and outstanding Retained earnings

Total stockholders' equi~/

$ 250,000 800,000 535,000

$ 1,585,000

Determine the book value per share of the preferred and common stock under two separate situations.

1. No preferred dividends are in arrears.

Book Value Per Preferred Share

Choose Numerator: I Choose Denominator:

Stockholders' equi~/ applicable to preferred shares .I Number of preferred shares outstanding .I +--->

$ 300,000J 10,000J

Book Value Per Preferred Share

= Sook value per preferred share

= $ 30.00 .... ~~ .... ~~~~~~~~~~~ ...... Choose Numerator:

Stockholders' equity applicable to common shares .I $ 1,285,000.,.I

Book Value Per Conmon Share

Choose Denominator:

Number of common shares outstanding .I 80,000.I

--'----'~-

2. Three years o f preferred dividends are in arrears.

Book Value Per Preferred ~hare

Choose Numerator: I Choose Denominator:

Stockholders' equity applicable to preferred shares .I I Number of preferred shares outstanding .I' -

$ 345,000.I I 10,000.I

Book Value Per Conmon Share ~ =

Choose Numerator: I Choose Denominator:

Stockholders' equi~/ applicable to common shares .II I Number of common shares outstanding .II

$ ol 1,240,000.I I ol 80,000.,.I

Book Value Per Conmon Share

= Sook value per common s11are ---- --= $ 16.06

= Book Value Per Preferred Share

= -k- Book value per preferred Share

= .$ 34.50

= Book Value Per Conmon Share

= I Sook value per common share

- I $ 15.50

sward:

6 10 out of • 10.00

· · · · · · · ·poifits ··· · · · · · · · · · · · · · · · · · · · · · · · · · · · · ··· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 1. A corporation issued 4,000 shares of $5 par value common stock for $35,000 cash.

Transaction General Journal Debit Credit

1 Cash ./ 35,-000./ +--~~~

Common stock. $5 par value ./ 20,000./

Paid-in capital in excess of par value, Common stock ./ 15,000./

award:

7 10 out of . 10.00

···· · · · · ·poirits · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · .. · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 2. A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their

efforts, estimated to be worth $40,000. The stock has a $ 1 per share stated value.

Transaction GeneHI Journal Debit Credit

1 Jorganization expenses ./.,._ __ 4-0-,o_o_o_.;,

Common stock, $1 stated value .,/ -2,000.,/

Paid-in capital in excess of stated value, common stock .,/ 38,000.,/

sward:

8 10 out of . 10.00

........... "' J)OintS' ........................................................ ..

3. A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $40,000. The stock has no stated value.

Transaction General Journal Debit Credit

1 torganization expenses ./ 40,000./

Common stock, no-par value ./ 40,000./

sward:

9 10 out of . 10.00

........................... ·polnrS' .... 4. A corporation issued 1,000 shares of $50 par v alue preferred stock for $60,000 cash.

Transaction General Journal Debit Credit

1 Cash ./ 60,000./ --=~_,

Preferred stock, $50 par v alue ./ 50,000./

Paid-in capital in excess of par value, preferred stock ./ 10,000./ -~~~

10. award: 10 out of 10.00

Company 1 2 3 4

Earnings per Share $ 12.00

10.00 7.50

50.00

Market Value per Share

$176.40 96.00 93.75

250.00

Compute the price-earnings ratio for each of these four separate companies.

Price-Earai!!lls B!ltio

Company Choose Numerator: Divided Choose Denominator:

Market value per share J I Earnings per share J 1 $ 176.40.I $ 12.00.;

2 96.00yl 10.00.;

3 93 75.I 750.I

4 250.00yl 50.00yl

Which stock might an analyst likely investigate as being potentially undeivalued by the market?

O company 1 O company 2 O company 3 ® company 4

Price-Earn· s Ratio

= """".'"" ""~ = 14.7

= 9.6

= 12.5

= 5.0

11. award: 10 out of 10.00

· ··············points ·················································································································································································· Stockholders' equity of Ernst Company consists of 80,000 shares of $5 par value, 8% cumulative preferred stock and 250,000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company's inception. Ernst did not dee lare any dividends in the prior year, but it now declares and pays a $110,000 cash dividend at the current year-end.

Determine the amount distributed to each class of stockholders for this two-year-old company.

Par Value per Preferred

Share

Dividend per Dividend Rate Preferred

Share

Number of Preferred

Shares Calculation of Preferred Dividend:

Total cash dividend

To preferred shareholders

To common shareholders

$ 5 00_.I

$ 110,000_.I

64,000_.I

46,ooo 1

8%_.I' $ 0.40 80,000_.I $

Preferred Dividend for two years

64,000_.I

l'l'Nard:

12 10outof • 10.00

···············pomts ················································ · · Of the following statements, which are true for the corporate form of organization? (Select all that apply .) a 13 ownership rights cannot be easily transferre<!.

a 13 owners have llnlimited liability for oorporate debts.

a 13 Capttal is more easily accumulated than with most other forms of organization.

a 13 Corporate income tllat is distributed to shareholders is usual~/ taxed tvtice.

a 13 It is a separate le-gal entity.

a 13 It has a limited life.

a 13 owners are not agents of the corporation.

award:

13 10outof . 10.00

............ '' °j'ioiiits° ..

Sudoku Company issues 7,000 shares of $7 par value common stock in exchange for land and a building. The land is valued at $45,000 and the building at $85,000. Prepare the journal entry to record issuance of the stock in exchange for the land and building.

Event General Journal Debit Credit

1 Land ./ 45,000./

Building ./ 85,000./

Common stock, $7 par valu·e ./ 49,000./

Paid-in capital in excess of par value, common stock ./ 81,000./

award:

14 10 out of . 10.00 .............. points ............................................................................... ..

Ecker Company reports $2,700,000 of net income for 2013 and declares $388,020 of cash dividends on its preferred stock for 2013. At the end of 2013, the company had 678,000 weighted-average shares of common stock.

1. What amount of net income is available to common stockholders for 2013?

Net income $ 2,700,000./

rTo preferred stockholders 388,020./

To common stockholders .. 1.J$ __ 2_,3_1_1_,9_8_o_,

2. What is the company's basic EPS for 2013?

!!!!sic earni!!llS l!!!f share

Choose Numerator: I Choose Denominator:

Net income available to common stockholders ./j I Weighted-average outstanding shares .I $ 2,311,980./ I 678,000./

Basic earnings per share

= Basic earnings per share

= $ 3.41

• P<•• I Question # 15 (of25) • I no« ~

··············poii'its ················································································································································· Prepare the issuer's journal entry for each separate transaction.

(a) On March 1, Atlantic Co. issues 42,500 shares of $4 par value common stock for $297,500 cash.

Date General Journal Mar. 1 Gash .I

Common stock, $4 par value .I Paid-in captial in excess of par value, common stock ./

Debit Credit

297,500.I

170,000.I

127,500.I

(b) On April 1, OP Co. issues no-par value common stock for $70,000 cash.

Date General Journal Debit Credit

Apr. 1 Cash "" 70,000.I

Common stock, no-par value "" 70,000.I -~--

(c) On April 6, MPG issues 2,000 shares of $25 par value common stock for $45,000 of inventory, $145,000 ofmachiner/, and accepts a $94,000 note payable.

Date General Journal Debit Credit

Apr. 6 Inventory

"" 45.000.I -

Machinery

"" 145,000.I

Note payable ./ 94,000.I

Common stock, $25 par value

"" 50,000.I

Paid-in captial in excess of par value, common stock

"" 46,000.I -

16. 8\llo'ard:

10 out of 10.00

···· ··· ··· ··· ··· ····poiiits ·· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ·· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ··· ·· a. Prepare the journal entry to record Autumn Company's issuance of 63,000 shares of no-par value

common stock assuming the shares sell for $29 cash per share.

Event .. General Journal

1 Gash - Common stock, no-par value

Debit

./ 1,827,000./[

./

Credit

1,827,000./ -

b. Prepare the journal entr/ to record Autumn Company's issuance of 63,000 shares of no-par value common stock assuming tl1e shares are exchanged for land valued at $1,827,000.

Event II General Journal Debit Credit

1 ./ 1,827,000./j <---~--... Land

Common stock, no-par value 1,827,000./

17. sward: 10 out of 10.00

······· points ································ a. Prepare the journal entry to record Tamasin•e Company's issuance of 5,000 shares of $100 par

value 7% cumulative preferred stock for $102 cash per share.

Transaction General Journal Debit Credit

1 Cash ./ 510,000./1

Preferred stock, $100 par value ./ 500,000./

Paid-in capital in excess of par value, preferred stock ./ 10,000./

b. Assuming the facts in part 1, if Tamasine declares a year-end cash dividend, what is the amount of dividend paid to preferred shareholders? (Assume no dividends in arrears.)

Par Value per Preferred Dividend Rate

--c:ha::.r,,_ __ $ 100.00./ 7.0%./ $ 7.00./

award:

18 10 out of • 10.00

· ............ ·poiilfs ......................................................... . On May 3, Zirbal Corporation purchased 4,000 shares of its own stock for $36,000 cash. On November 4, Zirbal reissued 850 shares of this treasur1 stock for $8,500.

Prepare t11e May 3 and November 4 journal entries to record Zirbal's purchase and reissuance of treasury stock.

Date General Journal Debit Credit

May 03 Treasury stock ./ 36,000./

Cash ./ 36,000./

Nov. 4 Cash ./ 8,500./

Treasur; stock ./ 7,650./

Paid·in capital, treasur; stock ./ 850./

19. sward: 10 out of 10.00 ............ points ...................................................................... .

Company 1 2 3 4

Annual Cash Dividend per

Share $ 16.06

13.86 3.96 0.96

Market Value

per Share $ 220.00

132.00 72.00 80.00

Compute the dividend yield for each of these four separate companies.

Dividend Yield

ll!r I or

Annual cash dividends per share ./ I Market value per share ./ 1 $ 16.06./ l $

2 $ 13.86./ I $

3 $ 3.96./ I $

4 $ 0.96./ I $

Which company's stock would probably not be classified as an income stock?

O company 1 O company 2 O company 3 ® company 4

220.00./

132.00./

72.00./

80.00./

= Dividend yield

= 7.3%

= 10.5%

= 5.5°ro

= 1.2%

20. eward: 10 out of 10.00

· ··············pomts ·························································· The following information is available for Amos Company for the year ended December 31, 2013.

a. Balance of retained earnings, December 31, 2012, prior to discovery of error, $1,375,000. b. Cash dividends declared and paid during 2013, $43,000. c It neglected to record 2011 depreciation expense of $55,500, which is net of $4,500 in income · taxes.

d. The company earned $126,000 in 2013 net income.

Prepare a 2013 statement of retained earnings for Amos Company. (Amounts to be deducted should be indicated with a minus sign.)

AMOS COMPANY Statement of Retained Earnings

For Year Ended December 31 , 2013

Retained earnings, December 31, 2012 ./ $

Prior period adjustment

1,375,000./

Depreciation expense error in 2011 (net of tax) ./ 55,500./ ,-------'- -'-,

Adjusted retained earnings, December 31, 2012 ./ 1,319,500

Add: Net income ./ 126,000./

Less: Dividends ./ 43,000./

Retained earnings, December 31, 2013 ./=$====1=,1=50=·=50=0=: 1

21. award: 10 out of 10.00

Epic Company earned net income of $900,000 this year. The number of common shares outstanding during the entire year was 400,000, and preferred shareholders received a $20,000 cash dividend.

Compute Epic Company's basic earnings per share.

Net income

$

Choose Numerator:

./ 900,000./

Preferred dividends ./

$ 20,000.,il

I

I

Basic Earninas Per Share

Choose Denominator:

= Weighted·average common shares outstanding ./ <---<--

400,000.,il = $

Basic EPS

Basic EPS

2.20 per share

22. ""'8ld: 10 out of 10.00

a. Prepare the journal entry to record Jevonte Company's issuance of 36,000 shares of its common stock assuming the shares have a $2 par value and sell for $18 cash per share.

Event General Journal Debit Credit

1 Gash ./ 648,000./

Common stock, $2 par value ./ 72,000./

Paid-in captial in excess of par value, common stock ./ 576,000./

b. Prepare the journal entry to record Jevonte Company's issuance of 36,000 shares of its common stock assuming the shares have a $2 stated value and sell for $18 cash per share.

Event

1

General Journal

Cash

Common stock, $2 stated value

Paid-in captial in excess of stated value, common stock ----

Debit Credit

./ 648,000./

./ 72,000./

./ 576,000./

award:

23 10 out of • 10.00

·············· l>oiiits ······················································ · ·· Compute Topp Company's price-earnings ra tio if its common stock has a market value of $20.54 per share and its EPS is $3.95.

Choose Nwnerator:

Market value per share

$ 20.54.,il I

Price Earninos Ratio

Choose Denominator:

Earnings per share

$

.I =

3.95.,il =

Price Earnings Ratio

Price Earnings Ratio

5.2 ----

24. award: 10 out of 10.00

·····························points···· The stockholders' equity section of Jun Comp any's balance sheet as of April 1 follows. On April 2, Jun declares and distributes a 10% stock dividend. The stock's per share market value on April 2 is $20 (prior to the dividend).

Common stock- $5 par value, 375,000 shares authorized, 200,000 shares issued and outstanding $ 1,000,000

600,000 833,000

Paid-in capital in excess of par value, common stock Retained earnings

Total stockholders' equi~/ $2,433,000

Prepare the stockholders' equity section immediately after the stock dividend.

Jun Company

Stockholders' Equity

April 2 (after stock div idend)

Common stock ./ $ 1.100,000./

Paid-in capital in excess of par value, common stock ./ 900,000./ --------; Total paid-in capital 2,000,000

Retained earnings ./ 433,000./ ------~

Total stockholders' equity $ 2,433,000 ------

award:

25 10outof . 10.00 ................... i>oii1ts ............................................................................................................................................................................................................................................................................................................................. ..

Murray Company reports net income of $770,000 for the year. It has no preferred stock, and its weighted-average common shares outstanding is 280,000 shares.

Compute its basic earnings per share.

Basic Ea mings Per Share

Choose Numerator: I Choose Denominator: ---Net income .I Preferred dividends .I I Weighted-average common shares outstanding .I =

$ 770,000../ $ 0../ 280,000../ = $ ~~~-~~- ~~~-~~- -~--

Basic EPS

Basic EPS

2. 75 I per share