Page 512 - Accounting Principles (A Business Perspective)

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Exercise G Why would a law firm ever consider accepting stock of a new corporation having a total par value of
USD 320,000 as payment in full of a USD 480,000 bill for legal services rendered? If such a transaction occurred,
give the journal entry the issuing company would make on its books.

Exercise H The stockholders' equity of Graf Company's balance is as follows:
Stockholders' equity:
Paid-in capital:
Common stock—without par value, $12
stated value; authorized 100,000
shares;
issued and outstanding, 70,000 shares $ 840,000
Paid-in capital in excess of stated value 340,000
Total paid-in capital $1,180,00
0
Retained earnings 80,000
Total stockholders' equity $1,260,00
0
Compute the average price at which the 70,000 issued shares of common stock were sold. Compute the book
value per share of common stock.

Problems
Problem A The outstanding capital stock of Robbins Corporation consisted of 3,000 shares of 10 per cent
preferred stock, USD 250 par value, and 30,000 shares of no-par common stock with a stated value of USD 250.
The preferred was issued at USD 412, the common at USD 480 per share. On 2005 January 1, the retained earnings
of the company were USD 250,000. During the succeeding five years, net income was as follows:
2005 $767,500
2006 510,000
2007 48,000
2008 160,000
2009 662,500
No dividends were in arrears as of 2005 January 1, and during the five years 2005-2009, the board of directors
declared dividends in each year equal to net income of the year.
Prepare a schedule showing the dividends declared each year on each class of stock assuming the preferred stock
is:
a. Cumulative.
b. Noncumulative.

Problem B On 2008 December 27, Glade Company was authorized to issue 250,000 shares of USD 24 par
value common stock. It then completed the following transactions:
2009
Jan. 14 Issued 45,000 shares of common stock at USD 30 per share for cash.
29 Gave the promoters of the corporation 25,000 shares of common stock for their services in organizing the
company. The board of directors valued these services at USD 744,000.
19 Exchanged 50,000 shares of common stock for the following assets at the indicated fair market values:

Land USD 216,000
Building 528,000
Machinery 720,000
a. Prepare general journal entries to record the transactions.
b. Prepare the balance sheet of the company as of 2009 March 1.

Accounting Principles: A Business Perspective 513 A Global Text