Acct Fall D: 2015 Spring B Smartbook 5 - B18

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1 1. value: 2.00 points Exercise 13-2 Accounting for par, stated, and no-par stock issuances LO P1 Rodriguez Corporation issues 18,000 shares of its common stock for $405,000 cash on February Assume the stock has a $20 par value. Prepare journal entries to record this event. view transaction list view general journal Date General Journal Debit Credit Feb. 20 Cash 405,000 Common Stock, $20 Par Value 360,000 Paid-in capital in excess of par value, common stock 45, Assume the stock has neither par nor stated value. Prepare journal entries to record this event. Page 1 of 3

2 Exercise Straight-Line: Bond computations, amortization, and bond retirement LO P2, P4 [The following information applies to the questions displayed below.] On January 1, 2013, Shay issues $250,000 of 10%, 12-year bonds at a price of Six years later, on January 1, 2019, Shay retires 20% of these bonds by buying them on the open market at All interest is accounted for and paid through December 31, 2018, the day before the purchase. The straight-line method is used to amortize any bond discount. references 27. value: 1.00 points Exercise Part 1 1. How much does the company receive when it issues the bonds on January 1, 2013? Cash proceeds from sale of bonds at issuance 28. value: 1.00 points Exercise Part 2 2. What is the amount of the discount on the bonds at January 1, 2013? Amount of discount 29. value: 1.00 points Exercise Part 3 3. How much amortization of the discount is recorded on the bonds for the entire period from January 1, Page 1 of 2

3 2013, through December 31, 2018? Amortization of discount 30. value: 1.00 points Exercise Part 4 4. What is the carrying (book) value of the bonds and the carrying value of the 20% soon-to-be-retired bonds as of the close of business on December 31, 2018? Par value Remaining discount Carrying value Entire Retired Group 20% Page 2 of 2

4 26. value: 3.00 points Exercise 14-9 Computing bond interest and price; recording bond issuance LO P2 Bringham Company issues bonds with a par value of $630,000 on their stated issue date. The bonds mature in 7 years and pay 8% annual interest in semiannual payments. On the issue date, the annual market rate for the bonds is 10%. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) 1. What is the amount of each semiannual interest payment for these bonds? Par (maturity) value Semiannual Rate = Semiannual cash interest payment 2. How many semiannual interest payments will be made on these bonds over their life? Number of payments 3. Use the interest rates given to select whether the bonds are issued at par, at a discount, or at a premium. At a discount. At a premium. At par. 4. Compute the price of the bonds as of their issue date. (Round intermediate calculations to the nearest dollar amount.) Page 1 of 2

5 Table values are based on: Cash Flow Par (maturity) value Interest (annuity) Price of bonds n = i = Table Value Amount Present Value 5. Prepare the journal entry to record the bonds issuance. (Round intermediate calculations to the nearest dollar amount.) view transaction list view general journal Journal Entry Worksheet 1 Record the issue of bonds with a par value of $630,000 for cash. Event General Journal Debit Credit 1 *Enter debits before credits done clear entry record entry rev: 09_21_2013_QC_35721 Page 2 of 2

6 25. value: 5.00 points Exercise 14-8 Recording bond issuance and premium amortization LO P1, P3 Woodwick Company issues 7%, five-year bonds, on December 31, 2012, with a par value of $94,000 and semiannual interest payments. Semiannual Period-End Unamortized Premium Carrying Value (0) 12/31/2012 $7,991 $101,991 (1) 6/30/2013 7, ,192 (2) 12/31/2013 6, ,393 Use the above straight-line bond amortization table and prepare journal entries for the following. (a) The issuance of bonds on December 31, (b) The first interest payment on June 30, (c) The second interest payment on December 31, view transaction list view general journal Journal Entry Worksheet Record the issue of bonds with a par value of $94,000 cash on December 31, Date General Journal Debit Credit dec. 31, 2012 *Enter debits before credits done clear entry record entry Page 1 of 1

7 24. value: 4.00 points Exercise 14-6 Recording bond issuance and discount amortization LO P1, P2 Paulson Company issues 8%, four-year bonds, on December 31, 2013, with a par value of $92,000 and semiannual interest payments. Semiannual Period-End Unamortized Discount Carrying Value (0) 12/31/2013 $6,573 $85,427 (1) 6/30/2014 5,751 86,249 (2) 12/31/2014 4,929 87,071 Use the above straight-line bond amortization table and prepare journal entries for the following. (a) The issuance of bonds on December 31, (b) The first interest payment on June 30, (c) The second interest payment on December 31, view transaction list view general journal Journal Entry Worksheet Record the issue of bonds with a par value of $92,000 cash December 31, Date General Journal Debit Credit Dec. 31, 2013 *Enter debits before credits done clear entry record entry Page 1 of 1

8 23. value: 4.00 points Exercise 14-5B Effective Interest: Amortization of bond premium LO P7 Quatro Co. issues bonds dated January 1, 2013, with a par value of $860,000. The bonds annual contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $905,068. Prepare an amortization table for these bonds using the effective interest method to amortize the premium. (Round your intermediate calculations to the nearest dollar amount.) Semiannual Interest Period-End Cash Interest Paid Bond Interest Expense Premium Amortization Unamortized Premium Carrying Value 01/01/ /30/ /31/ /30/ /31/ /30/ /31/2015 Total Page 1 of 1

9 22. value: 4.00 points Exercise 14-3B Effective Interest: Amortization of bond discount LO P6 Stanford issues bonds dated January 1, 2013, with a par value of $251,000. The bonds annual contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $238, What is the amount of the discount on these bonds at issuance? Discount 2. How much total bond interest expense will be recognized over the life of these bonds? Total bond interest expense over life of bonds: Amount repaid: payments of Par value at maturity Total repaid Less amount borrowed Total bond interest expense 3. Use the effective interest method to amortize the discount for these bonds. (Round your intermediate calculations to the nearest dollar amount.) Page 1 of 2

10 Semiannual Interest Period-End Cash Interest Paid Bond Interest Expense Discount Amortization Unamortized Discount Carrying Value 01/01/ /30/ /31/ /30/ /31/ /30/ /31/2015 Total Page 2 of 2

11 21. value: 4.00 points Exercise 14-2 Straight-Line: Amortization of bond discount LO P2 Tano issues bonds with a par value of $88,000 on January 1, The bonds annual contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $83, What is the amount of the discount on these bonds at issuance? Discount 2. How much total bond interest expense will be recognized over the life of these bonds? Total bond interest expense over life of bonds: Amount repaid: payments of Par value at maturity Total repaid Less amount borrowed Total bond interest expense 3. Use the straight-line method to amortize the discount for these bonds. (Round your intermediate calculations to the nearest dollar amount.) Page 1 of 2

12 Semiannual Period- End 01/01/ /30/ /31/ /30/ /31/ /30/ /31/2015 Unamortized Discount Carrying Value Page 2 of 2

13 20. value: 3.00 points Exercise Cash dividends, treasury stock, and statement of retained earnings LO C3, P2, P3 Alexander Corporation reports the following components of stockholders equity on December 31, 2013: Common stock $25 par value, 60,000 shares authorized, 37,000 shares issued and outstanding $ 925,000 Paid-in capital in excess of par value, common stock 74,000 Retained earnings 364,000 Total stockholders equity $ 1,363,000 In year 2014, the following transactions affected its stockholders equity accounts. Jan. 2 Purchased 3,700 shares of its own stock at $25 cash per share. Jan. 7 Directors declared a $1.50 per share cash dividend payable on Feb. 28 to the Feb. 9 stockholders of record. Feb. 28 Paid the dividend declared on January 7. July 9 Sold 1,480 of its treasury shares at $30 cash per share. Aug. 27 Sold 1,850 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 $59,000 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 Page 1 of 3

14 view transaction list view general journal Journal Entry Worksheet Record the purchase 3,700 shares of its own common stock for $25 cash per share. Date General Journal Debit Credit Jan 02 *Enter debits before credits done clear entry record entry 2. Prepare a statement of retained earnings for the year ended December 31, (Amounts to be deducted should be indicated by a minus sign.) ALEXANDER CORPORATION Statement of Retained Earnings For Year Ended December 31, Prepare the stockholders equity section of the company s balance sheet as of December 31, (Amounts to be deducted should be indicated by a minus sign.) Page 2 of 3

15 ALEXANDER CORPORATION Stockholders Equity Section of the Balance Sheet December 31, 2014 Total stockholders equity rev: 01_23_2014_QC_43873 Page 3 of 3

16 19. value: 2.00 points Exercise Accounting for equity under IFRS LO C3, P1 Unilever Group reports the following equity information for the years ended December 31, 2009 and 2010 (euros in millions). December Share capital Share premium Other reserves (6,468) (3,426) Retained profit 15,825 15,171 Shareholders equity 9,978 12, Match each of the three account titles share capital, share premium, and retained profit with the usual account title applied under U.S. GAAP. a. Share capital b. Share premium c. Retained profit 2. Prepare Unilever s journal entry, using its account titles, to record the issuance of capital stock assuming that its entire par value stock was issued on December 31, 2009, for cash. Page 1 of 2

17 view transaction list view general journal Journal Entry Worksheet 1 Record the issue of capital stock assuming that its entire par value stock was issued on December 31, 2009, for cash. Event General Journal Debit Credit 1 *Enter debits before credits done clear entry record entry 3. What were Unilever s 2010 dividends assuming that only dividends and income impacted retained profit for 2010 and that its 2010 income totaled 2,687? (Enter answers in millions of euros and not in whole euros.) Dividends rev: 01_23_2014_QC_43873 Page 2 of 2

18 18. value: 2.00 points Exercise Book value per share LO A4 The equity section of Cyril Corporation s balance sheet shows the following. Preferred stock 5% cumulative, $25 par value, $30 call price, 10,000 shares issued and outstanding $ 250,000 Common stock $10 par value, 45,000 shares issued and outstanding 450,000 Retained earnings 267,500 Total stockholders equity $ 967,500 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: / Choose Denominator: = Book Value Per Preferred Share / = Book value per preferred share / = Book Value Per Common Share Choose Numerator: / Choose Denominator: = Book Value Per Common Share / = Book value per common share / = 2. Three years of preferred dividends are in arrears. Page 1 of 2

19 Book Value Per Preferred Share Choose Numerator: / Choose Denominator: = Book Value Per Preferred Share / = Book value per preferred Share / = Book Value Per Common Share Choose Numerator: / Choose Denominator: = Book Value Per Common Share / = Book value per common share / = rev: 01_23_2014_QC_43873 Page 2 of 2

20 17. value: 1.00 points Exercise Dividend yield computation and interpretation LO A3 Company Annual Cash Dividend per Share Market Value per Share 1 $ $ Compute the dividend yield for each of these four separate companies. Dividend Yield Company Choose Numerator: / Choose Denominator: = Dividend Yield / = Dividend yield 1 / = 2 / = 3 / = 4 / = Which company s stock would probably not be classified as an income stock? Company 1 Company 2 Company 3 Company 4 rev: 01_23_2014_QC_43873, 10_11_2014_QC_55601 Page 1 of 1

21 16. value: 1.00 points Exercise Price-earnings ratio computation and interpretation LO A2 Company Earnings per Share Market Value per Share 1 $ $ Compute the price-earnings ratio for each of these four separate companies. Price-Earnings Ratio Company Choose Numerator: Divided by Choose Denominator: Price-Earnings Ratio / = Price-earnings ratio 1 / = 2 / = 3 / = 4 / = Which stock might an analyst likely investigate as being potentially undervalued by the market? Company 1 Company 2 Company 3 Company 4 rev: 01_23_2014_QC_43873 Page 1 of 1

22 15. value: 1.00 points Exercise Earnings per share LO A1 Kelley Company reports $1,575,000 of net income for 2013 and declares $220,500 of cash dividends on its preferred stock for At the end of 2013, the company had 290,000 weighted-average shares of common stock. 1. What amount of net income is available to common stockholders for 2013? Net income To preferred stockholders To common stockholders 2. What is the company s basic EPS for 2013? Basic earnings per share Choose Numerator: / Choose Denominator: Basic earnings per share / = Basic earnings per share / = rev: 01_23_2014_QC_43873 Page 1 of 1

23 14. value: 1.00 points Exercise Earnings per share LO A1 Ecker Company reports $1,500,000 of net income for 2013 and declares $210,000 of cash dividends on its preferred stock for At the end of 2013, the company had 350,000 weighted-average shares of common stock. 1. What amount of net income is available to common stockholders for 2013? Net income To preferred stockholders To common stockholders 2. What is the company s basic EPS for 2013? Basic earnings per share Choose Numerator: / Choose Denominator: Basic earnings per share / = Basic earnings per share / = rev: 01_23_2014_QC_43873 Page 1 of 1

24 13. value: 1.00 points Exercise Preparing a statement of retained earnings LO C3 The following information is available for Amos Company for the year ended December 31, a. Balance of retained earnings, December 31, 2012, prior to discovery of error, $857,000. b. Cash dividends declared and paid during 2013, $19,000. c. It neglected to record 2011 depreciation expense of $55,600, which is net of $7,200 in income taxes. d. The company earned $220,000 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 Prior period adjustment rev: 01_23_2014_QC_43873 Page 1 of 1

25 12. value: 2.00 points Exercise 13-9 Dividends on common and cumulative preferred stock LO C2 York s outstanding stock consists of 52,000 shares of cumulative 9.50% preferred stock with a $10 par value and also 130,000 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 $ 40, , , ,400 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 2 decimal places.) Annual Preferred Dividend: Par Value per Preferred Share Total Cash Dividend Paid Dividend Rate Paid to Preferred Dividend per Preferred Share Paid to Common Number of Preferred Shares Dividends in Arrears at year-end Preferred Dividend 2013 $ 40, , , ,400 Total $ 280,825 rev: 01_23_2014_QC_43873 Page 1 of 1

26 11. value: 1.00 points Exercise 13-8 Dividends on common and noncumulative preferred stock LO C2 York s outstanding stock consists of 13,000 shares of noncumulative 5.20% preferred stock with a $10 par value and also 32,500 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: 2013 $ 5, , , ,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. (Round your "Dividend per Preferred Share" answers to 2 decimal places.) Par Value per Preferred Share Dividend Rate Dividend per Preferred Share Number of Preferred Shares Preferred Dividend Annual Preferred Dividend: Total Cash Dividend Paid 2013 $ 5,000 Paid to Preferred Paid to Common Dividends in Arrears at year-end , , ,000 Total: $ 297,760 rev: 01_23_2014_QC_43873 Page 1 of 1

27 Exercise 13-7 Stock dividends and per share book values LO P2 [The following information applies to the questions displayed below.] The stockholders equity of TVX Company at the beginning of the day on February 5 follows: Common stock $10 par value, 150,000 shares authorized, 64,000 shares issued and outstanding $ 640,000 Paid-in capital in excess of par value, common stock 525,000 Retained earnings 675,000 Total stockholders equity $ 1,840,000 On February 5, the directors declare a 12% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock s market value is $45 per share on February 5 before the stock dividend. The stock s market value is $40 per share on February 28. rev: 01_23_2014_QC_43873, 03_06_2014_QC_46282 references 8. value: 2.00 points Exercise 13-7 Part 1 1. Prepare entries to record both the dividend declaration and its distribution. Page 1 of 3

28 view transaction list view general journal Journal Entry Worksheet 1 2 Record the declaration of 12% stock dividend. Date General Journal Debit Credit Feb 05 *Enter debits before credits done clear entry record entry rev: 05_07_2013_QC_30211, 03_06_2014_QC_ value: 1.00 points Exercise 13-7 Part 2 2. One stockholder owned 500 shares on February 5 before the dividend. Compute the book value per share and total book value of this stockholder s shares immediately before and after the stock dividend of February 5. (Round your "Book value per share" answers to 2 decimal places.) Book value per share Total book value of shares Before After Page 2 of 3

29 10. value: 1.00 points Exercise 13-7 Part 3 3. Compute the total market value of the investor s shares in part 2 as of February 5 and February 28. (Round your "Dividend per Preferred Share" answers to 2 decimal places.) Total market value of shares February 5 February 28 Page 3 of 3

30 7. value: 2.00 points Exercise 13-6 Stock dividends and splits LO P2 On June 30, 2013, Sharper Corporation s common stock is priced at $32.00 per share before any stock dividend or split, and the stockholders equity section of its balance sheet appears as follows. Common stock $8 par value, 70,000 shares authorized, 28,000 shares issued and outstanding $ 224,000 Paid-in capital in excess of par value, common stock 100,000 Retained earnings 324,000 Total stockholders equity $ 648,000 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. 1. Complete the below table to calculate the retained earnings balance, total stockholders equity and number of outstanding shares. (Amounts to be deducted should be indicated by a minus sign.) Stock Dividend Common stock Paid in capital in excess of par value Before Stock Dividend Total contributed capital 0 Retained Earnings Total Stockholders' Equity $ 0 Impact of Stock Dividend After Stock Dividend Number of common shares outstanding 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. 2. Complete the below table to calculate the retained earnings balance, total stockholders equity and number of outstanding shares. (Amounts to be deducted should be indicated by a minus sign.) Page 1 of 2

31 Exercise 13-3 Recording stock issuances LO P1 [The following information applies to the questions displayed below.] Prepare journal entries to record the following four separate issuances of stock. rev: 01_23_2014_QC_43873 references 2. value: 1.00 points Exercise 13-3 Part 1 1. A corporation issued 8,000 shares of $10 par value common stock for $96,000 cash. view transaction list view general journal Journal Entry Worksheet 1 Record the issue of 8,000 shares of $10 par value common stock for $96,000 cash. Transaction General Journal Debit Credit 1 *Enter debits before credits done clear entry record entry Page 1 of 4

32 Stock Split Common stock Before Stock Split Impact of Stock Split After Stock Split Paid in capital in excess of par value Total contributed capital Retained Earnings Total Stockholders' Equity Number of common shares outstanding rev: 01_23_2014_QC_43873 Page 2 of 2

33 6. value: 1.00 points Exercise 13-4 Stock issuance for noncash assets LO P1 Sudoku Company issues 16,000 shares of $8 par value common stock in exchange for land and a building. The land is valued at $235,000 and the building at $375,000. Prepare the journal entry to record issuance of the stock in exchange for the land and building. view transaction list view general journal Journal Entry Worksheet 1 Record the issue of 16,000 shares of $8 par value common stock in exchange for land valued at $235,000 and a building valued at $375,000. Event General Journal Debit Credit 1 *Enter debits before credits done clear entry record entry rev: 01_23_2014_QC_43873 Page 1 of 1

34 3. value: 1.00 points Exercise 13-3 Part 2 2. A corporation issued 4,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $53,000. The stock has a $1 per share stated value. view transaction list view general journal Journal Entry Worksheet 1 Record the issue of 4,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $53,000. The stock has a $1 per share stated value. Transaction General Journal Debit Cred 1 *Enter debits before credits done clear entry record entry 4. value: 1.00 points Exercise 13-3 Part 3 3. A corporation issued 4,000 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. Page 2 of 4

35 view transaction list view general journal Journal Entry Worksheet 1 Record the issue of 4,000 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. Transaction General Journal Debit Credit 1 *Enter debits before credits done clear entry record entry 5. value: 1.00 points Exercise 13-3 Part 4 4. A corporation issued 2,000 shares of $50 par value preferred stock for $153,000 cash. Page 3 of 4

36 view transaction list view general journal Journal Entry Worksheet 1 Record the issue of 2,000 shares of $50 par value preferred stock for $153,000 cash. Transaction General Journal Debit Credit 1 *Enter debits before credits done clear entry record entry Page 4 of 4

Supplemental Instruction Handouts Financial Accounting Review Chapters 12, 13, 14 and 16 Answer Key

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