Brief Exercise 15-9
Shamrock Corporation has outstanding 22,000 shares of $5 par value common stock. On August 1,
2017, Shamrock reacquired 210 shares at $82 per share. On November 1, Shamrock reissued
the 210 shares at $73 per share. Shamrock had no previous treasury stock transactions.
Prepare Shamrock’s journal entries to record these transactions using the cost method. (Credit
account titles are automatically indented when amount is entered. Do not indent manually.
If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
8/1/17
11/1/17
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Brief Exercise 15-12
Splish Mining Company declared, on April 20, a dividend of $529,000 payable on June 1. Of this
amount, $131,000 is a return of capital.
Prepare the April 20 and June 1 entries for Splish. (Credit account titles are automatically
indented when amount is entered. Do not indent manually. If no entry is required, select
"No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Apr. 20
June 1
Exercise 15-6
Pina Corporation is authorized to issue 46,000 shares of $5 par value common stock. During 2017,
Pina took part in the following selected transactions.
1. Issued 5,000 shares of stock at $49 per share, less costs related to the issuance of the stock
totaling $5,400.
2. Issued 1,200 shares of stock for land appraised at $46,000. The stock was actively traded on a
national stock exchange at approximately $50 per share on the date of issuance.
3. Purchased 480 shares of treasury stock at $44 per share. The treasury shares purchased were
issued in 2013 at $41 per share.
(a) Prepare the journal entry to record item 1.
(b) Prepare the journal entry to record item 2.
(c) Prepare the journal entry to record item 3 using the cost method.
(Credit account titles are automatically indented when amount is entered. Do not indent
manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the
amounts.)
No. Account Titles and Explanation
Debit
Credit
(a)
(b)
(c)
Exercise 15-7
Joe Dumars Company has outstanding 40,000 shares of $5 par common stock which had been issued
at $30 per share. Joe Dumars then entered into the following transactions.
1.
Purchased 5,000 treasury shares at $45 per share.
2.
Resold 2,000 of the treasury shares at $49 per share.
3.
Resold 500 of the treasury shares at $40 per share.
Indicate the effect each of the three transactions has on the financial statement categories listed in
the table below, assuming Joe Dumars Company uses the cost method.
#
Assets
Liabilities
Stockholders’
Equity
Paid-in
Capital
Retained
Earnings
Net
Income
1.
2.
3.
Exercise 15-10
For a recent 2-year period, the balance sheet of Buffalo Company showed the following stockholders’
equity data at December 31 (in millions).
Additional paid-in capital
Common stock
2017
$ 900
663
2016
$ 810
654
Retained earnings
Treasury stock
Total stockholders’ equity
Common stock shares issued
Common stock shares authorized
Treasury stock shares
7,200
1,764
5,310
896
$6,999
$5,878
221
500
36
218
500
28
(a) Answer the following questions.
(1) What is the par value of the common stock? (Round par value to 2 decimal places, e.g.
$3.15.)
Par value of common stock
$
(2) What is the cost per share of treasury stock at December 31, 2017, and at December 31, 2016?
Cost per share of Treasury stock
December 31, 2017 December 31, 2016
$
$
(b) Prepare the stockholders’ equity section at December 31, 2017. (Enter account name only and
do not provide descriptive information.)
Buffalo Company
Balance Sheet (in millions of dollars) (Partial)
$
:
$
Exercise 15-12
Carla Corporation has 10.70 million shares of common stock issued and outstanding. On
June 1, the board of directors voted an 86 cents per share cash dividend to stockholders of
record as of June 14, payable June 30.
Prepare the journal entries for each of the dates above assuming the dividend represents a
distribution of earnings. (Credit account titles are automatically indented when amount is
entered. Do not indent manually. If no entry is required, select "No Entry" for the
account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
SHOW LIST OF ACCOUNTS
LINK TO TEXT
How would the entries differ if the dividend were a liquidating dividend? (Credit account titles
are automatically indented when amount is entered. Do not indent manually. If no entry
is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
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Exercise 15-17
Monty Corporation’s post-closing trial balance at December 31, 2017, is shown as follows.
MONTY CORPORATION
POST-CLOSING TRIAL BALANCE
DECEMBER 31, 2017
Dr.
Accounts payable
Accounts receivable
Accumulated depreciation—buildings
Additional paid-in capital in excess
of par—common
From treasury stock
Allowance for doubtful accounts
Bonds payable
Buildings
Cash
Common stock ($1 par)
Dividends payable (preferred stock—cash)
Inventory
Land
Preferred stock ($50 par)
Prepaid expenses
Retained earnings
Treasury stock (common at cost)
Totals
Cr.
$ 273,600
$ 496,000
176,000
1,428,000
146,000
32,000
290,000
1,466,000
198,000
182,000
4,400
569,000
381,000
450,000
42,000
329,000
159,000
$3,311,000
$3,311,000
At December 31, 2017, Monty had the following number of common and preferred shares.
Authorized
Issued
Outstanding
Common
546,000
182,000
169,000
Preferred
54,000
9,000
9,000
The dividends on preferred stock are $4 cumulative. In addition, the preferred stock has a preference
in liquidation of $50 per share.
Prepare the stockholders’ equity section of Monty’s balance sheet at December 31, 2017. (Enter
account name only and do not provide descriptive information.)
MONTY CORPORATION
Stockholders’ Equity
$
:
$
Exercise 15-21
The outstanding capital stock of Waterway Corporation consists of 1,800 shares of $100 par value, 7%
preferred, and 4,500 shares of $50 par value common.
Assuming that the company has retained earnings of $86,500, all of which is to be paid out in
dividends, and that preferred dividends were not paid during the 2 years preceding the current year,
state how much each class of stock should receive under each of the following conditions.
(a) The preferred stock is noncumulative and nonparticipating. (Round answers to 0 decimal
places, e.g. $38,487.)
Preferred
$
Common
$
(b) The preferred stock is cumulative and nonparticipating. (Round answers to 0 decimal places,
e.g. $38,487.)
Preferred
$
Common
$
(c) The preferred stock is cumulative and participating. (Round the rate of participation to 4
decimal places, e.g.1.4278%. Round answers to 0 decimal places, e.g. $38,487.)
Preferred
$
Common
$
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Brief Exercise 16-11
Larkspur Corporation had 291,000 shares of common stock outstanding on January 1, 2017. On May
1, Larkspur issued 31,200 shares.
(a) Compute the weighted-average number of shares outstanding if the 31,200 shares were issued
for cash.
$
Weighted-average number of shares outstanding
(b) Compute the weighted-average number of shares outstanding if the 31,200 shares were issued in
a stock dividend.
$
Weighted-average number of shares outstanding
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Exercise 16-4
On January 1, 2016, when its $30 par value common stock was selling for $80 per share, Bridgeport
Corp. issued $11,500,000 of 8% convertible debentures due in 20 years. The conversion option
allowed the holder of each $1,000 bond to convert the bond into five shares of the corporation’s
common stock. The debentures were issued for $12,420,000. The present value of the bond payments
at the time of issuance was $9,775,000, and the corporation believes the difference between the
present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the
corporation’s $30 par value common stock was split 2 for 1, and the conversion rate for the bonds was
adjusted accordingly. On January 1, 2018, when the corporation’s $15 par value common stock was
selling for $135 per share, holders of 30% of the convertible debentures exercised their conversion
options. The corporation uses the straight-line method for amortizing any bond discounts or
premiums.
(a) Prepare the entry to record the original issuance of the convertible debentures. (Credit account
titles are automatically indented when amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
(b) Prepare the entry to record the exercise of the conversion option, using the book value method.
(Credit account titles are automatically indented when amount is entered. Do not indent
manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the
amounts.)
Account Titles and Explanation
Debit
Credit
Exercise 16-10
On November 1, 2017, Ivanhoe Company adopted a stock-option plan that granted options to key
executives to purchase 21,600 shares of the company’s $10 par value common stock. The options
were granted on January 2, 2018, and were exercisable 2 years after the date of grant if the grantee
was still an employee of the company. The options expired 6 years from date of grant. The option
price was set at $40, and the fair value option-pricing model determines the total compensation
expense to be $324,000.
All of the options were exercised during the year 2020: 14,400 on January 3 when the market price
was $64, and 7,200 on May 1 when the market price was $73 a share.
Prepare journal entries relating to the stock option plan for the years 2018, 2019, and 2020. Assume
that the employee performs services equally in 2018 and 2019. (Credit account titles are
automatically indented when amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter 0 for the amounts. Round
intermediate calculations to 5 decimal places, e.g. 1.24687 and final answers to 0 decimal
places, e.g. 5,125.)
Date
Account Titles and Explanation
Debit
Credit
Jan. 3, 2020
May 1, 2020
Exercise 16-14
Larkspur Company issues 12,000 shares of restricted stock to its CFO, Mary Tokar, on January 1,
2017. The stock has a fair value of $600,000 on this date. The service period related to this restricted
stock is 5 years. Vesting occurs if Tokar stays with the company until December 31, 2021. The par
value of the stock is $10. At December 31, 2017, the fair value of the stock is $401,000.
(a) Prepare the journal entries to record the restricted stock on January 1, 2017 (the date of grant),
and December 31, 2018. (Credit account titles are automatically indented when amount is
entered. Do not indent manually. If no entry is required, select "No Entry" for the account
titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
(b) On July 25, 2021, Tokar leaves the company. Prepare the journal entry to account for this
forfeiture. (Credit account titles are automatically indented when amount is entered. Do not
indent manually. If no entry is required, select "No Entry" for the account titles and enter 0
for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
7/25/21
Exercise 16-24
The Oriole Corporation issued 10-year, $4,430,000 par, 7% callable convertible subordinated
debentures on January 2, 2017. The bonds have a par value of $1,000, with interest payable annually.
The current conversion ratio is 14:1, and in 2 years it will increase to 19:1. At the date of issue, the
bonds were sold at 96. Bond discount is amortized on a straight-line basis. Oriole’s effective tax
was 35%. Net income in 2017 was $9,050,000, and the company had 1,885,000 shares outstanding
during the entire year.
(a) Compute both basic and diluted earnings per share. (Round answers to 2 decimal places, e.g.
$2.55.)
Basic earnings per share
Diluted earnings per share
$
$
Exercise 16-18
Sarasota Inc. presented the following data.
Net income
$2,530,000
Preferred stock: 47,000 shares outstanding, $100 par, 8%
cumulative, not convertible
Common stock: Shares outstanding 1/1
4,700,000
777,600
Issued for cash, 5/1
308,400
Acquired treasury stock for cash, 8/1
146,400
2-for-1 stock split, 10/1
Compute earnings per share. (Round answer to 2 decimal places, e.g. $2.55.)
Earnings per share
$
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