Complex Accounting Questions

Week 4

 

Brief Exercise 13-4

On June 1, Noonan Inc. issues 4,000 shares of no-par common stock at a cash price of $6 per share. Journalize the issuance of the shares assuming the stock has a stated value of $1 per share. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Cash = Issues shares x cash price = 4,000 x 6 = 24,000

Common Stock = Issues shares x stated value = 4,000 x 1 = 4,000

Paid-in Capital in Excess of Stated Value—Common Stock = 4,000 x 5(6-1) = 20,000

 

Account titles and explanation	Debt	Credit
Cash	24,000
Common Stock		4,000
Paid-in Capital in Excess of Stated Value—Common Stock		20,000

 

Brief Exercise 13-7

Garb Inc. issues 5,000 shares of $100 par value preferred stock for cash at $130 per share. Journalize the issuance of the preferred stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Cash =5,000 x 130 = 650,000

Preferred stock =5,000 x 100 = 500,000

Paid-in Capital in Excess of Par—Preferred Stock =5,000 x 30(130-100) = 150,000

Account titles and explanation	Debt	Credit
Cash	650,000
Common Stock		500,000
Paid-in Capital in Excess of Par-Preferred Stock		150,000

Brief Exercise 13-8

Pine Corporation has the following accounts at December 31: Common Stock, $10 par, 5,000 shares issued, $50,000; Paid-in Capital in Excess of Par—Common Stock $30,000; Retained Earnings $45,000; and Treasury Stock, 500 shares, $11,000.

 

Prepare the stockholders’ equity section of the balance sheet. (Enter the account name only and do not provide the descriptive information provided in the question.)

Common stock, $10 par value, 5,000 shares issued and 4,500 shares outstanding = 5000 x 10 = 50,000

Treasury stock (500 common shares) = 11,000

 

Pine Corporation balance sheet December 31
Stockholders’ equity
Paid-in Capital
Capital Stock
Common Stock		50,000
Additional Paid-in Stock
Paid-in Capital in Excess of Par—Common Stock		30,000
Total paid in Capital  = 50,000 + 30,000 =		80,000
Retained Earnings		4,500
Total paid in Capital and Retained Earnings = 80,000 + 45,000(4,500 x 10) =		125,000
Less	Treasury Stock	11,000?
Total Stockholders’ equity = 125,000 -11,000 =		114,000

 

Exercise 13-2

Andrea has prepared the following list of statements about corporations.Identify each statement as true or false.

1.      Corporation management is both an advantage and a disadvantage of a corporation compared to a proprietorship or a partnership. True

2.      Limited liability of stockholders, government regulations, and additional taxes are the major disadvantages of a corporation. False

3.      When a corporation is formed, organization costs are recorded as an asset. = False

4.      Each share of common stock gives the stockholder the ownership rights to vote at stockholder meetings, share in corporate earnings, keep the same percentage ownership when new shares of stock are issued, and share in assets upon liquidation. True

5.      The number of issued shares is always greater than or equal to the number of authorized shares. False

6.      A journal entry is required for the authorization of capital stock. False

7.      Publicly held corporations usually issue stock directly to investors. False

8.      The trading of capital stock on a securities exchange involves the transfer of already issued shares from an existing stockholder to another investor. True

9.      The market price of common stock is usually the same as its par value. False

10.  Retained earnings are the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock. False

 

Exercise 13-4

 

Osage Corporation issued 2,000 shares of stock. Prepare the entry for the issuance under the following assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

a) The stock had a par value of $5 per share and was issued for a total of $52,000.

b) The stock had a stated value of $5 per share and was issued for a total of $52,000.

c) The stock had no par or stated value and was issued for a total of $52,000.

d) The stock had a par value of $5 per share and was issued to attorneys for services during incorporation valued at $52,000.

e) The stock had a par value of $5 per share and was issued for land worth $52,000.

 

Common Stock = 2,000 x 5 = 10,000

a)

Account titles and explanation	Debt	Credit
Cash	52,000
Common Stock		10,000
Paid-in Capital in Excess of Par-Common Stock  = 52,00 – 10,000 =		42,000

 

b)

Account titles and explanation	Debt	Credit
Cash	52,000
Common Stock		10,000
Paid-in Capital in Excess of Stated Value-Common Stock  = 52,00 – 10,000 =		42,000

 

c)

Account titles and explanation	Debt	Credit
Cash	52,000
Common Stock		52,000

 

d)

Account titles and explanation	Debt	Credit
Organization Expense	52,000
Common Stock		10,000
Paid-in Capital in Excess of Stated Value-Common Stock  = 52,00 – 10,000 =		42,000

 

e)

Account titles and explanation	Debt	Credit
Land	52,000
Common Stock		10,000
Paid-in Capital in Excess of Stated Value-Common Stock  = 52,00 – 10,000 =		42,000

 

Exercise 13-7 (Part level Submission

 

On January 1, 2014, the stockholders’ equity section of Newlin Corporation shows common stock ($5 par value) $1,500,000; paid-in capital in excess of par $1,000,000; and retained earnings $1,200,000. During the year, the following treasury stock transactions occurred.

Mar. 1 Purchased 50,000 shares for cash at $15 per share.

July. 1 Sold 10,000 treasury shares for cash at $17 per share.

Sept.1 Sold 8,000 treasury shares for cash at $14 per share.

 

a) Journalize the treasury stock transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

Mar. 1

Account titles and explanation	Debt	Credit
Treasury Stock	750,000
Cash		750,000

Treasury Stock = 50,000 ×15 =750,000

 

 

 

July. 1

Account titles and explanation	Debt	Credit
Cash	170,000
Treasury Stock		150,000
Paid-in Capital from Treasury Stock		20,000

 

Cash = 10,000 × 17 = 170,000

Treasury Stock =10,000 × 15 = 150,000

Paid-in Capital from Treasury Stock =10,000 × 2 = 20,000

 

 

 

 

 

 

Sept.1

Account titles and explanation	Debt	Credit
Cash	112,000
Paid-in Capital from Treasury Stock	8,000
Treasury Stock		120,000

 

Cash = 8,000 × 14 =112,000

Treasury Stock =8,000 × 15= 120,000

Paid-in Capital from Treasury Stock =8,000 × 1= 8,000

 

 

b) Restate the entry for September 1, assuming the treasury shares were sold at $12 per share. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Sept.1

Account titles and explanation	Debt	Credit
Cash	96000
Paid-in Capital from Treasury Stock	20,000
Retained Earnings	4,000
Treasury Stock		120000

 

Cash  = 8,000 × 12 =96000

Treasury Stock =8,000 × 15= 120,000

 

Problem 13-1A (Part level Submission)

 

DeLong Corporation was organized on January 1, 2014. It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 500,000 shares of no-par common stock with a stated value of $2 per share. The following stock transactions were completed during the first year.

Jan. 10 Issued 80,000 shares of common stock for cash at $4 per share.

Mar. 1 Issued 5,000 shares of preferred stock for cash at $105 per share.

Apr. 1 Issued 24,000 shares of common stock for land. The asking price of the land was $90,000. The fair value of the land was $85,000.

May. 1 Issued 80,000 shares of common stock for cash at $4.5 per share.

Aug. 1 Issued 10,000 shares of common stock to attorneys in payment of their bill of $30,000 for services performed in helping the company organize.

Sept. 1 Issued 10,000 shares of common stock for cash at $5 per share.

Nov. 1 Issued 1,000 shares of preferred stock for cash at $109 per share.

 

A) Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Jan. 10

Account titles and explanation	Debt	Credit
Cash  =80,000 x 4	320,000
Common stock =80,000 x 2 ($4-$2)		160,000
Paid-in Capital in Excess of Stated Value-Common Stock = 80,000 x 2		160,000

 

Mar. 1

Account titles and explanation	Debt	Credit
Cash	525000
Preferred stock		500,000
Paid-in Capital in Excess of Par-Preferred Stock		25,000

 

Cash = 5,000 x 105 =525000

Preferred Stock = 5,000 x 100 =500,000

Paid-in Capital in Excess of Par-Preferred Stock = 5,000 x 5 =25,000

 

 

 

Apr. 1

Account titles and explanation	Debt	Credit
Land	85,000
Common stock		48,000
Paid-in Capital in Excess of Stated Value-Common Stock		37,000

 

Common Stock = 24,000 x 2 =48,000

Paid-in Capital in Excess of Stated Value-Common Stock =85,000 – 48,000 =37,000

 

May. 1

Account titles and explanation	Debt	Credit
Cash	360,000
Common stock		160,000
Paid-in Capital in Excess of Stated Value-Common Stock		200,000

 

Cash = 80,000 x 4.5 = 360,000

Common Stock = 80,000 x 2 = 160,000

Paid-in Capital in Excess of Stated Value-Common Stock = 80,000 x 2.50 =200,000

 

Aug. 1

Account titles and explanation	Debt	Credit
Organization Expense	30,000
Common stock		20,000
Paid-in Capital in Excess of Stated Value-Common Stock		10,000

 

Common Stock =10,000 x 2 = 20,000

Paid-in Capital in Excess of Stated Value-Common Stock = 30,000 – 20,000 =10,000

 

 

 

Sept. 1

Account titles and explanation	Debt	Credit
Cash	50,000
Common stock		20,000
Paid-in Capital in Excess of Stated Value-Common Stock		30,000

 

Cash = 10,000 x 5 = 50,000

Common Stock = 10,000 x 2= 20,000

Paid-in Capital in Excess of Stated Value-Common Stock = 10,000 x 3 = 30,000

 

Nov. 1

Account titles and explanation	Debt	Credit
Cash	109,000
Preferred Stock		100,000
Paid-in Capital in Excess of Par-Preferred Stock		9,000

 

Cash = 1,000 x 109=109,000

Preferred Stock = 1,000 x 100=100,000

Paid-in Capital in Excess of Par-Preferred Stock = 1,000 x 9=9,000

 

B) Post to the stockholders’ equity accounts. (Post entries in the order of journal entries presented in the previous part.)

Preferred Stock

Date	Debt	Credit	Balance
Mar. 1		500,000	500,000
Nov. 1		100,000	600,000

Common Stock

Date	Debt	Credit	Balance
Jan. 10		160,000	160000
Apr. 1		48,000	208,000
May. 1		160,000	368,000
Aug. 1		20,000	388,000
Sept. 1		20,000	408,000

 

Paid-in Capital in Excess of Par-Preferred Stock

Date	Debt	Credit	Balance
Mar. 1		25,000	25,000
Nov. 1		9,000	34,000

 

 

Paid-in Capital in Excess of Stated Value-Common Stock

Date	Debt	Credit	Balance
Jan. 10		160,000	160000
Apr. 1		37000	197,000
May. 1		200,000	397,000
Aug. 1		10,000	407,000
Sept. 1		30,000	437,000

 

C)Prepare the paid-in capital section of stockholders’ equity at December 31, 2014. (Enter the account name only and do not provide the descriptive information provided in the question.)

DeLong Corporation Balance sheet (partial) December 31, 2014

Paid-in capital
Capital stock
Preferred Stock		600,000
Common Stock		408,000
Total Capital stock		1008000
Additional Paid-in capital
Paid-in Capital in Excess of Stated Value-Common Stock	437,000
Paid-in Capital in Excess of Par-Preferred Stock	34,000
Total Additional Paid-in capital		471,000
Total Paid-in Capital		1479,000

 

 

 

Brief Exercise 13-3

On May 10, Jack Corporation issues 3,400 shares of $12 par value common stock for cash at $22 per share. Journalize the issuance of the stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

May. 1

Account titles and explanation	Debt	Credit
Cash	74,800
Common stock		40,800
Paid-in Capital in Excess of Par-Common Stock		34,000

 

Cash = 3,400 x 22 = 74,800

Common Stock = 3,400 x 12 = 40,800

Paid-in Capital in Excess of Par-Common Stock = 3,400 x 10(22-12) = 34,000

Brief Exercise 13-5

Lei Inc.’s $11 par value common stock is actively traded at a market price of $16 per share. Lei issue 4,900 shares to purchase land advertised for sale at $74,980. Journalize the issuance of the stock in acquiring the land. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

Account titles and explanation	Debt	Credit
Land	74,800
Common stock		53900
Paid-in Capital in Excess of Par-Common Stock		24,500

 

Cash = 74,980

Common Stock = 4,900 x 11 = 53900

Paid-in Capital in Excess of Par-Common Stock = 4,900 x 6(16-11) = 24,500

 

Brief Exercise 13-6

On July 1, Raney Corporation purchases 590 shares of its $6 par value common stock for the treasury at a cash price of $9 per share. On September 1, it sells 300 shares of the treasury stock for cash at $13 per share.

 

Journalize the two treasury stock transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

July 1

Account titles and explanation	Debt	Credit
Treasury stock	5310
Cash		5310

Treasury stock = 590 x 9 =5,310

 

September 1

Account titles and explanation	Debt	Credit
Cash	3,900
Treasury stock		2700
Paid-in Capital from Treasury Stock		1200

Cash = 300 x 13 = 3,900

Treasury Stock = 300 x 9 = 2,700

Paid-in Capital from Treasury Stock = 300 x 4(13-9) =1200

Exercise 13-3

During its first year of operations, Foyle Corporation had the following transactions pertaining to its common stock.

 

Jan. 10 Issued 66,400 shares for cash at $6 per share.

July. 1 Issued 42,500 shares for cash at $8 per share

 

A) Journalize the transactions, assuming that the common stock has a par value of $6 per share. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

 

Jan. 10

Account titles and explanation	Debt	Credit
Cash	398,400
Common Stock		398,400

 

Cash = 66,400 x 6 = 398,400

 

 

 

July 1

Account titles and explanation	Debt	Credit
Cash	340,000
Common Stock		255,000
Paid-in Capital in Excess of Par-Common Stock		85,000

 

 

Cash = 42,500 x 8= 340,000

Common Stock = 42,500 x 6 = 255,000

Paid-in Capital in Excess of Par-Common Stock = 42,500 x 2(8-6) =85,000

 

 

B) Journalize the transactions, assuming that the common stock is no-par with a stated value of $1 per share. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

Jan. 10

Account titles and explanation	Debt	Credit
Cash	398,400
Common Stock		66400
Paid-in Capital in Excess of Stated Value-Common Stock		332000

 

Cash = 66,400 x 6 = 398,400

Common Stock = 66,400 x 1 = 66,400

Paid-in Capital in Excess of Stated Value-Common Stock = 66,400 x 5(6-1) = 332000

 

 

Jul. 1

Account titles and explanation	Debt	Credit
Cash	340,000
Common Stock		42,500
Paid-in Capital in Excess of Stated Value-Common Stock		29,7500

 

Cash = 42,500 x 8= 340,000

Common Stock = 42,500 x 1 = 42,500

Paid-in Capital in Excess of Stated Value-Common Stock = 42,500 x 7(8-1) = 29,7500

 

Exercise 13-5

Quay Co. had the following transactions during the current period.

 

Mar. 2 Issued 5,300 shares of $5 par value common stock to attorneys in payment of a bill for $32,500 for services performed in helping the company to incorporate.

 

Jun. 12 Issued 55,400 shares of $5 par value common stock for cash of $345,000.

 

Jul. 11 Issued 1,600 shares of $110 par value preferred stock for cash at $140 per share.

 

Nov. 28 Purchased 1,700 shares of treasury stock for $79,700.

 

Journalize the transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

Mar. 2.

Account titles and explanation	Debt	Credit
Organization Expense	32,500
Common Stock		26,500
Paid-in Capital in Excess of Par-Common Stock		6,000

Common Stock = 5,300 x 5 =26,500

 

Jun. 12

Account titles and explanation	Debt	Credit
Cash	345,000
Common Stock		277,000
Paid-in Capital in Excess of Par-Common Stock		68,000

Common Stock = 55,400 x 5 = 277,000

 

 

Jul. 11

Account titles and explanation	Debt	Credit
Cash	224,000
Preferred Stock		176,000
Paid-in Capital in Excess of Par-Preferred Stock		48,000

Cash = 1,600 x 140 = 224,000

Preferred Stock = 1,600 x 110 = 176,000

Paid-in Capital in Excess of Par-Preferred Stock = 1,600 x 30(140-110) = 48,000

 

 

 

 

Nov. 28

Account titles and explanation	Debt	Credit
Treasury Stock	79,700
Cash		79,700

 

Exercise 13-8

Rinehart Corporation purchased from its stockholders 5,700 shares of its own previously issued stock for $279,300. It later resold 1,900 shares for $52 per share, then 1,900 more shares for $47 per share, and finally 1,900 shares for $41 per share.

 

Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

To record purchase from stockholders

Account titles and explanation	Debt	Credit
Treasury Stock	279,300
Cash		279,300

 

 

To record sales of shares at $52 per share

Account titles and explanation	Debt	Credit
Cash	98,800
Treasury Stock		93,100
Paid-in Capital from Treasury Stock		5,700

Cash = 1,900 x 52 = 98,800

Treasury Stock = 1,900 x 49 = 93,100

 

To record sales of shares at $47 per share

Account titles and explanation	Debt	Credit
Cash	89,300
Paid-in Capital from Treasury Stock	3,800
Treasury Stock		93,100

Cash = 1,900 x $47= 89,300

Treasury Stock = 1,900 x 49 = 93,100

 

 

To record sales of shares at $41 per share

Account titles and explanation	Debt	Credit
Retained Earnings	13,300
Paid-in Capital from Treasury Stock	1,900
Cash	77,900
Treasury Stock		93,100

 

Cash = 1,900 x $41=77,900

Paid-in Capital from Treasury Stock = 5,700 – $3,800 = 1,900

Treasury Stock = 1,900 x 49 = 93,100

 

 

Problem 13-2A

Fechter Corporation had the following stockholders’ equity accounts on January 1, 2014: Common Stock ($4 par) $405,680, Paid-in Capital in Excess of Par Common Stock $178,180, and Retained Earnings $101,940. In 2014, the company had the following treasury stock transactions.

 

Mar. 1 Purchased 6,570 shares at $9 per share

June 1 Sold 1,480 shares at $13 per share.

Sept. 1 Sold 1,590 shares at $11 per share.

Dec. 1 Sold 1,240 shares at $6 per share.

 

Fechter Corporation uses the cost method of accounting for treasury stock. In 2014, the company reported net income of $29,080.

 

A) Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2014, for net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.

 

Mar. 1

Account titles and explanation	Debt	Credit
Treasury Stock	59130
Cash		59130

Treasury Stock = 6,570 x 9 = 59130

 

June 1

Account titles and explanation	Debt	Credit
Cash	19,240
Treasury Stock		13,320
Paid-in Capital from Treasury Stock		5920

Cash = 1,480 x 13= 19,240

Treasury Stock = 1,480 x 9 = 13,320

Paid-in Capital from Treasury Stock = 1,480 x 4(13-9) = 5920

 

Sept. 1

Account titles and explanation	Debt	Credit
Cash	17,490
Treasury Stock		14,310
Paid-in Capital from Treasury Stock		3,180

Cash = 1,590 x 11 = 17,490

Treasury Stock = 1,590 x 9 = 14,310

Paid-in Capital from Treasury Stock = 1,590 x 2(11-9) = 3,180

 

Dec. 1

Account titles and explanation	Debt	Credit
Cash	7,440
Paid-in Capital from Treasury Stock	3720
Treasury Stock		11,160

Cash = 1,240 x 6 = 7,440

Paid-in Capital from Treasury Stock = 1,240 x 3 (9-6) = 3,720

Treasury Stock = 1,240 x 9 = 11,160

 

 

 

Dec. 31

Account titles and explanation	Debt	Credit
Income Summary	29,080
Retained Earnings		29,080

 

B) Open accounts for Paid-in Capital from Treasury Stock, Treasury Stock, and Retained Earnings. Post to these accounts using J10 as the posting reference. (Post entries in the order of journal entries presented in the previous part.)

 

Paid-in Capital from Treasury Stock

Date	Explanation Ref	Debt	Credit	Balance
June 1	J10		5920	5920
Sept. 1	J10		3180	9,100
Dec. 1	J10	3,720		5,380

 

 

Treasury Stock

Date	Explanation Ref	Debt	Credit	Balance
Mar. 1	J10	59130		59130
June 1	J10		13320	45,810
Sept. 1	J10		14310	31,500
Dec. 1	J10		11160	20,340

 

Retained Earnings

Date	Explanation Ref	Debt	Credit	Balance
Jan. 1	ü			101,940
Dec. 1	J10		29,080	131020

C) Prepare the stockholders’ equity section for Fechter Corporation at December 31, 2014. (Enter the account name only and do not provide the descriptive information provided in the question.)

 

Fechter Corporation Balance sheet (partial) December 31, 2014

 

Stockholders’ equity
Paid-in Capital
Capital Stock
Common Stock			405,680
Additional Paid-in Capital
Paid-in Capital in Excess of Par-Common Stock		178,180
Paid-in Capital from Treasury Stock		5380
Total Additional Paid-in Capital			183,560
Total Paid-in Capital			589,240
Retained Earnings
Total paid in Capital and Retained Earnings			720,260
Less	Treasury Stock		20,340
Total Stockholders’ equity = 125,000 -11,000 =			699,920

Stockholders’ equity
Paid-in capital
Capital stock
Common stock, $4 par, 101,420 shares issued and 99,160 outstanding					$405,680
Additional paid-in capital
Paid-in Capital in Excess of Par-Common Stock			$178,180
Paid-in Capital from Treasury			5,380
Total additional paid-in capital					183,560
Total paid-in capital					589,240
Retained earnings					131,020
Total paid-in capital and retained earnings					720,260
Less: Treasury stock (2,260 common shares, at cost)					(20,340	)
Total stockholders’ equity					$699,920