Connect Financial Accounting Chapter 11

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Connect Financial Accounting Chapter 11

Q1. Rodriguez Corporation issues 5,000 shares of its common stock for $130,100 cash on February 20. Prepare journal entries to record this event under each of the following separate situations.

  1. The stock has a $20 par value.
  2. The stock has neither par nor stated value.
  3. The stock has a $10 stated value.

connect financial accounting chapter 11

Q2. Prepare journal entries to record the following four separate issuances of stock.

  1. A corporation issued 5,000 shares of $20 par value common stock for $120,000 cash.
  2. A corporation issued 2,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $53,000. The stock has a $2 per share stated value.
  3. A corporation issued 2,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $53,000. The stock has no stated value.
  4. A corporation issued 1,250 shares of $25 par value preferred stock for $84,250 cash.

connect financial accounting chapter 11

Q3. Sudoku Company issues 32,000 shares of $6 par value common stock in exchange for land and a building. The land is valued at $236,000 and the building at $365,000. Prepare the journal entry to record issuance of the stock in exchange for the land and building.

connect financial accounting chapter 11

Q4. On June 30, 2017, Sharper Corporation’s common stock is priced at $30.50 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows.

Common stock—$6 par value, 65,000 shares
authorized, 26,000 shares issued and outstanding
$156,000
Paid-in capital in excess of par value, common stock 100,000
Retained earnings 256,000
Total stockholders’ equity $512,000

1. Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares.
a.,b.& c. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.

connect financial accounting chapter 11
2. Assume that the company implements a 2-for-1 stock split instead of the stock dividend in part 1. Answer these questions about stockholders’ equity as it exists after issuing the new shares.
a.,b.& c. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.

connect financial accounting chapter 11

Q5. York’s outstanding stock consists of 85,000 shares of 6.0% preferred stock with a $5 par value and also 150,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends:

2015 total cash dividends $13,900
2016 total cash dividends 23,500
2017 total cash dividends 280,000
2018 total cash dividends 430,000

Determine the amount of dividends paid each year to each of the two classes of stockholders: preferred and common. Also compute the total dividends paid to each class for the four years combined. Assume that the preferred stock is noncumulative. (Round your “Dividend per Preferred Share” answers to 3 decimal places.)

connect financial accounting chapter 11

Q6. York’s outstanding stock consists of 80,000 shares of 7.0% preferred stock with a $5 par value and also 140,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends:

2015 total cash dividends $16,500
2016 total cash dividends 26,000
2017 total cash dividends 275,000
2018 total cash dividends 425,000

Determine the amount of dividends paid each year to each of the two classes of stockholders assuming that the preferred stock is cumulative. Also determine the total dividends paid to each class for the four years combined. (Round your “Dividend per Preferred Share” answers to 3 decimal places.)

connect financial accounting chapter 11

Q7. Alexander Corporation reports the following components of stockholders’ equity on December 31, 2016:

Common stock—$25 par value, 70,000 shares authorized,
46,000 shares issued and outstanding
$1,150,000
Paid-in capital in excess of par value, common stock 92,000
Retained earnings 396,000
Total stockholders’ equity $1,638,000

In year 2017, the following transactions affected its stockholders’ equity accounts.

Jan 2 Purchased 4,600 shares of its own stock at $25 cash per share.
Jan 7 Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record.
Feb 28 Paid the dividend declared on January 7.
July 9 Sold 1,840 of its treasury shares at $30 cash per share.
Aug 27 Sold 2,300 of its treasury shares at $20 cash per share.
Sept 9 Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record.
Oct 22 Paid the dividend declared on September 9.
Dec 31 Closed the $68,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Required:
1. Prepare journal entries to record each of these transactions for 2017.

connect financial accounting chapter 11
2. Prepare a statement of retained earnings for the year ended December 31, 2017.

connect financial accounting chapter 11

3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2017.

connect financial accounting chapter 11

Connect Financial Accounting Chapter 11 Quiz

Q1. A company issued 60 shares of $100 par value common stock for $7,000 cash. The journal entry to record the issuance is:

  • Debit Cash $7,000; credit Common Stock $7,000.
  • Debit Investment in Common Stock $7,000; credit Cash $7,000.
  • Debit Cash $7,000; credit Common Stock $6,000; credit Paid-in Capital in Excess of Par Value, Common Stock $1,000.
  • Debit Common Stock $6,000, debit Investment in Common Stock $1,000; credit Cash $7,000.
  • Debit Cash $7,000; credit Paid-in Capital in Excess of Par Value, Common Stock $6,000, credit Common Stock $1,000.

Q2. Corporations may buy back their own stock for any of the following reasons except to:

  • Avoid a hostile take-over.
  • Have shares available for a merger or acquisition.
  • Have shares available for employee compensation.
  • Maintain market value for the company stock.
  • Allow management to assume the voting rights.

Q3. A corporation sold 14,000 shares of its $1 par value common stock at a cash price of $13 per share. The entry to record this transaction would include:

  • A debit to Paid-in Capital in Excess of Par Value, Common Stock for $182,000.
  • A debit to Cash for $14,000.
  • A credit to Common Stock for $182,000.
  • A credit to Common Stock for $14,000.
  • A credit to Paid-in Capital in Excess of Par Value, Common Stock for $196,000.

Q4. The following data were reported by a corporation:

Authorized shares 20,000
Issued shares 15,000
Treasury shares 3,000
  • 12,000
  • 15,000
  • 17,000
  • 20,000
  • 23,000

Q5. Sweet Company’s outstanding stock consists of 1,000 shares of cumulative 5% preferred stock with a $100 par value and 10,000 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.

Dividend Declared
year 1 $2,000
year 2 $6,000
year 3 $32,000
  • $7,000 preferred; $25,000 common.
  • $5,000 preferred; $27,000 common.
  • $15,000 preferred; $17,000 common.
  • $32,000 preferred; $0 common.
  • $0 preferred; $32,000 common.

Q6. Prior to June 30, a company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock on June 30 for $40 per share. On July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of the shares at $38 per share. What is the balance in the Treasury Stock account on August 2?

  • $5,050
  • $2,600
  • $100
  • $1,200
  • $0

Q7. West Company declared a $0.50 per share cash dividend. The company has 190,000 shares issued, and 10,000 shares in treasury stock. The journal entry to record the dividend declaration is:

  • Debit Retained Earnings $90,000; credit Common Dividends Payable $90,000.
  • Debit Common Dividends Payable $95,000; credit Cash $95,000.
  • Debit Retained Earnings $5,000; credit Common Dividends Payable $5,000.
  • Debit Common Dividends Payable $90,000; credit Cash $90,000.
  • Debit Retained Earnings $95,000; credit Common Dividends Payable $95,000.

Q8. On September 1, Ziegler Corporation had 50,000 shares of $5 par value common stock, and $1,500,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:

  • Debit Retained Earnings $750,000; credit Common Stock Split Distributable $750,000.
  • Debit Retained Earnings $750,000; credit Common Stock $750,000.
  • Debit Retained Earnings $250,000; credit Common Stock $250,000.
  • Debit Retained Earnings $250,000; credit Stock Split Payable $250,000.
  • No entry is made for this transaction.

Q9. Percy Corporation was formed on January 1. The corporate charter authorized 100,000 shares of $10 par value common stock. During the first month of operation, the corporation issued 400 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation. The entry to record this transaction would include:

  • A debit to Organization Expenses for $4,000.
  • A debit to Organization Expenses for $5,000.
  • A credit to Common Stock for $5,000.
  • A credit to Paid-in Capital in Excess of Par Value, Common Stock for $5,000.
  • A debit to Paid-in Capital in Excess of Par Value, Common Stock for $2,000.

Q10. A company issued 70 shares of $30 par value preferred stock for $4,000 cash. The journal entry to record the issuance is:

  • Debit Cash $2,100; credit Preferred Stock $2,100.
  • Debit Investment in Preferred Stock $2,100; credit Cash $2,100.
  • Debit Cash $4,000; credit Preferred Stock $4,000.
  • Debit Preferred Stock $2,100, debit Investment in Preferred Stock $1,900; credit Cash $4,000.
  • Debit Cash $4,000; credit Paid-in Capital in Excess of Par Value, Preferred Stock $1,900, credit Preferred Stock $2,100.