Work4Me Accounting Simulations. Problem Sixteen

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1 Work4Me Accounting Simulations 3 rd Web-Based Edition Problem Sixteen Common Stock, Preferred Stock, And Treasury Stock Page 1

2 Introduction Business-Way, Inc., is a small telecommunications firm specializing in tele-communications between credit unions. Located in downtown Penyrn, California, Bus-Way has grown from a modest 5-person operation to an employer who has a large staff with varying skills in telecommunications, accounting, and financing. In addition to providing telecommunication services, it also provides financing for installation of its telecommunication services. In the coming year, the company will issue additional common stock, issue preferred stock, and repurchase some its common stock. The normal, day-to-day transactions of sales and operating expenses are ignored for this problem. In a real world situation it is unlikely that all of the transactions or all of the general ledger accounts would be found in, or used by, a corporate business. Log on to Work4Me and from the Problems Menu Bar select Problem 16: Common, Preferred, and Treasury Stock. Do the following: 1) Move the pointer to Journal/Ledgers/Statements and select Chart of Accounts. 2) Print the Chart of Accounts for Buy-Way, Incorporated. 3) Move the pointer to Journal/Ledgers/Statements and select General Ledger. 4) Print the Trial Balance. RECORD THE TRANSACTIONS FOR BUS-WAY INCORPORATED Note: Identify each journal entry by Transaction Number. The stock transactions are made in relatively small dollar amounts, for illustrative purposes. Page 2

3 TRANSACTIONS Student Analysis Transaction 1: Issued par value common stock at a price in excess of par value The company issued 10,000 shares of its $5.00 par value common stock for $6.00 per share. Invoice: COMST Transaction 2: Issued no-par value common stock The company issued 8,000 shares of its no-par value common stock for $36,000. Invoice: NRPCS. Transaction 3: Issued preferred stock at par value The company issued 400 shares of its $100 par, 4% preferred stock. Invoice: PREST. Transaction 4: Repaid a mortgage note Issued a check to ABC Financing for $10,800 to pay off the balance of the $10,000 mortgage note, plus interest of $800. Check: Invoice: MNOTE. Transaction 5: Reacquired shares of Common Stock Issued a check number for $2,000 to purchase 500 shares of the company s $5.00 par value common stock paying $4.00 per share. Check: Invoice: TRSTK. Transaction 6: Issued Treasury Stock Bus-Way sold 100 shares of its Treasury Stock for $7.00 per share. The stock was acquired earlier at a cost of only $4.00 per share. Invoice: TRSTK. Page 3

4 Transactions continued Transaction 7: Issued Treasury Stock The company sold an additional 100 shares of its Treasury Stock that it had acquired at a price of $4.00 per share, for $3.00 per share. Student Analysis Invoice: TRSTK. Transaction 8: Issued Common Stock for Land The company issued 12,000 shares of its $5.00 par value common stock and a mortgage note for $50,000 for a parcel of land it plans to develop in the future. Invoice: COMST. Transaction 9: Issued No-Par Common Stock Issued 1,000 shares of no-par value common stock for $5,000. Invoice: NPRCS Transaction 10: Sold additional Treasury Stock shares Bar-Way sold the remaining 300 shares of Treasury Stock (cost basis $4.00 per share) for $2.00 per share. There will be four accounts in this compound journal entry. Invoice: TRSTK Transaction 11: Issued par value common stock at a price in excess of par value Issued 3,000 shares of $5.00 par value common stock for $7.00 per share. Invoice: COMST Transaction 12: Declared and paid a cash dividend Issued a check for a $6,000 cash dividend declared and paid today to all stockholders of record. Bus-Way does not have a Dividends account or Dividends Payable account, but records all dividends directly to the Retained Earnings account. Check: Invoice: CASHD. This concludes the Transactions Page 4

5 Now that you have completed entering the transactions, it is time to check the accuracy of your work. 1) Move the pointer to Check Figures and click. 2) Move the pointer down to Problem Check Figures and click. 3) Print the Check Figures for Problem 16 Common, Preferred, and Treasury Stock. Should you have any Incorrect Balances, follow the instructions in the Error Correction Procedures from Module 1 Demonstration Problem. If all of your balances are correct, move the pointer to Administration/Files: Reset and Backup/Backup Data Files, then continue with Instructions 1 to Print the Trial Balance. Instructions 2. Print the following General Ledger Accounts: 101 Cash 301 Common Stock 302 Additional Paid-In Capital 303 Common Stock No Par Value 305 Additional Paid-In Capital, Treasury Stock 306 Preferred Stock 4% - $100 Par Valu 315 Treasury Stock 3. Print the General Journal. 4. Exit the program. 5. Using the required documents, complete the Work4Me Problem 16: Common, Preferred and Treasury Stock evaluation at the end of this Module. 6. Log On to your program and move the pointer to Evaluations, select Exam 16: Common, Preferred, and Treasury Stock and click. 7. Complete the Evaluation, using your completed Evaluation as a guide. 8. Follow the instructions at the top of the text box to Save, Score, and Print the Evaluation. Page 5

6 WORK4ME - PROBLEM 16 COMMON, PREFERRED, AND TREASURY STOCK NAME CLASS DAY AND TIME DATE 1. From the balances shown on the End-of-Period Trial Balance, what is the value of total Stockholders Equity? 2. When common stock is sold for cash, Stockholder Equity A. increases B. decreases C. does not change 3. When treasury stock is sold for more than its cost (Transaction 6), identify by number which account will be credited for the difference between selling price and cost credited? A. 301 B. 303 C. 305 D. 310 E. 315 $ 4. What was the purchase price of the land acquired on Transaction 8? $ 5. When treasury stock is sold at a price less than its cost basis, and Account Number 305, Additional Paid-In Capital: Treasury Stock has a $0.00 balance, what account will be debited? A. Cash B. Treasury Stock C. Interest Expense D. Retained Earnings E. None of the above 6. When treasury stock is sold at a price that is $1,000 less than the cost basis of the stock, and the Additional Paid-In Capital, Treasury Stock account credit balance is only $200, the Retained Earnings account will be: A. debited for $200 B. debited for $800 C. debited for $1,000 D. credited for the total value of the Treasury Stock. E. credited for $200 Page 6

7 WORK4ME - PROBLEM When treasury stock is reissued, the total value of Stockholders Equity will A. increase B. decrease C. remained unchanged 8. When Treasury Stock is purchased: A. cash is debited. B. total equity increases. C. the Treasury Stock account is credited. D. revenues almost always increase. E. None of the above 9. What type of account is Additional Paid-In Capital, Treasury Stock? A. Asset B. Liability C. Stockholders Equity D. Revenue E. Expense 10. When a cash dividend is declared and paid, Stockholders Equity A. increases B. decreases C. does not change Page 7

Work4Me Accounting Simulations. Problem Fifteen

Work4Me Accounting Simulations 3 rd Web-Based Edition Problem Fifteen Long Term Notes and Bonds Page 1 Introduction Bus-Way, Incorporated, is a small telecommunications firm specializing in telecommunications