Chapter 11 Homework

Chapter 11 Homework – Student Templates – 7th EditionM 11 – 4
To expand operations, Aragon Consulting issued 1,000 shares of previously unissued common stock
with a par value of $1. The price for the stock was $50 per share.
Required:
Analyze the accounting equation effects and record the journal entry for the stock issuance. Would
your answer be different if the par value were $2 per share? If so, analyze the accounting equation
effects and record the journal entry for the stock issuance with a par value of $2.
Assets
Cash
+50,000
Liabilities
No Effect
Stockholders’ Equity
Common Stock
+1,000
Additional Paid-in Capital
+49,000
Journal Entry Stock Issuance with a Par Value of $1
Cash (1,000  $50)
50,000
Common Stock (1,000  $1)
1,000
Additional Paid-in Capital, Common Stock
49,000
Assets
Liabilities
Stockholders’ Equity
Journal Entry Stock Issuance with a Par Value of $2
Chapter 11 Homework – ACCT 220 7th Edition
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M 11 – 9
Sturdy Stone Tools, Inc., announced a 100 percent stock dividend.
Required: Determine the impact (increase, decrease, no change) of this dividend on the following:
No Change in Total Assets
1.
Total Assets
No Change in Total Liabilities
2.
Total Liabilities
3.
Common Stock
4.
Total Stockholders’ Equity
Market Value of Common Stock
5.
(MV per share of common stock)
Will decrease market value.
M 11 – 10
Assume Sturdy Stone Tools, Inc., announced a 2 for 1 stock split.
Required: Determine the impact (increase, decrease, no change) of this dividend on the following:
1.
Total Assets
2.
Total Liabilities
3.
Common Stock
No change in total common stock (par value decreases)
4.
Total Stockholders’ Equity
No change in total stockholders’ equity.
Market Value of Common Stock
5.
(MV per share of common stock)
Will decrease market value.
Chapter 11 Homework – ACCT 220 7th Edition
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M 11 – 11
Colliers, Inc., has 100,000 shares of cumulative preferred stock outstanding. The preferred stock pays
dividends in the amount of $2 per share, but because of cash flow problems, the company did not
pay any dividends last year. The board of directors plans to pay dividends in the amount of $600,000
this year.
Required: How much allocated to preferred stockholders and how much to common stockholders?
Total Dividends
$600,000
Allocated to Preferred
Allocated to Common Stock Shareholders
M 11 – 12
Refer to the previous example, M 11 – 11.
Colliers, Inc., has 100,000 shares of noncumulative preferred stock outstanding. The preferred stock
pays dividends in the amount of $2 per share, but because of cash flow problems, the company did
not pay any dividends last year. The board of directors plans to pay dividends in the amount of
$600,000 this year.
Assume the preferred stock is noncumulative.
Required: How much allocated to preferred stockholders and how much to common stockholders?
Total Dividends
$600,000
Allocated to Preferred
Allocated to Common Stock Shareholders
Chapter 11 Homework – ACCT 220 7th Edition
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Exercise 11 – 1
The annual report for General Mills disclosed that 1 billion shares of common stock have been
authorized. At the beginning of 2017, 755 million shares had been issued and the number of shares in
treasury stock was 178 million. During 2017, the only common share transactions were that 11 million
common shares were reissued from treasury and 27 million common shares were purchased and held
as treasury stock.
Required: At year end of 2017, determine the number of shares of common stock issued, the number
of shares of treasury stock & the number of shares of common stock outstanding at year-end.
(a) Computation of the number of shares of common stock issued at year-end 2017:
Beginning Balance (2017)
755 Million
Changes during 2017
0
Balance at Year-End (2017)
755 Million
(a) Computation of the number of shares of treasury stock at year-end 2017:
Beginning Balance (2017)
178 Million
Shares repurchased in 2017
Shares reissued in 2017
Balance at end of 2017
194 Million
(a) Computation of the number of shares of common stock outstanding at year-end 2017:
Issued stock (see a above)
755 Million
Treasury stock (see b above)
Balance at end of 2017
Reminder: the number of shares issued is the number sold to date (doesn’t include treasury stock)
Outstanding Shares (used for dividends) = Number Issued – Number of Treasury Stock
Chapter 11 Homework – ACCT 220 7th Edition
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Exercise 11 – 3
North Wind Aviation received its charter during January authorizing the following capital stock:
Preferred Stock: 8%., $10 par, authorized 20,000 shares & Common Stock: $1 par, authorized 50,000
The following transactions occurred in the 1st year:
a. Issued a total of 40,000 shares of t common stock for $15 per share.
b. Issued 10,000 shares of preferred stock at $16 per share.
c. Issued 3,000 shares of common stock at $20 per share & 1,000 shares preferred stock at $16.
d. Net income for the first year was $48,000, but no dividends were declared.
Required: Prepare the stockholders’ equity section of the balance sheet at December 31.
Co Contributed Capital:
P
Preferred Stock, 8%, par $10, authorized 20,000; issued & outstanding 11,000 shares
Additional Paid-in Capital, Preferred*
Common Stock, par $1, authorized 50,000 shares; issued/outstanding, 43,000 shares
Additional Paid-in Capital, Common^
R
Total Contributed Capital
836,000
Retained Earnings
$48,000
Total Stockholders’ Equity
$884,000
Make Note: Do the journal entries for each transaction above (transactions a – d) to help you
prepare the Statement of Stockholders’ Equity.
Chapter 11 Homework – ACCT 220 7th Edition
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Exercise 11 – 3 continued
a. Issued a total of 40,000 shares of common stock; $15/share; Par $1/share
Cash (40,000 X $15)
$600,000
Common Stock (40,000 X $1)
$40,000
PIC – Common Stock (40,000 X $14)
$560,000
b. Issued 10,000 shares of preferred stock; $16/share; Par $10/share
Cash (10,000 X $16)
$160,000
Common Stock (10,000 X $10)
$100,000
PIC – Common Stock (10,000 X $6)
$60,000
c. Issued 3,000 shares common stock $20/share and 1,000 shares of preferred stock $16/share
d. Net Income for the first year was $48,000, but no dividends were declared.
No journal entry would be prepared for net income, specifically, as this would be a result of recording
revenues and expenses throughout the year. However, the $48,000 in net income will be added to
the ending balance in Retained Earnings. There are no dividends, therefore, no reduction to
Retained Earnings.
Chapter 11 Homework – ACCT 220 7th Edition
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