Page 547 - Accounting Principles (A Business Perspective)

13. Corporations: Paid-in capital, retained earnings, dividends, and treasury stock

Exercise C The stockholders' equity section of Jay Company's balance sheet on 2009 December 31, shows
100,000 shares of authorized and issued USD 20 stated value common stock, of which 9,000 shares are held in the
treasury. On this date, the board of directors declared a cash dividend of USD 2 per share payable on 2010 January

21, to stockholders of record on January 10. Give dated journal entries for these.
Exercise D Kevin Company has outstanding 75,000 shares of common stock without par or stated value, which
were issued at an average price of USD 80 per share, and retained earnings of USD 3,200,000. The current market
price of the common stock is USD 120 per share. Total authorized stock consists of 500,000 shares.
a. Give the required entry to record the declaration of a 10 per cent stock dividend.
b. If, alternatively, the company declared a 30 per cent stock dividend, what additional information would you
need before making a journal entry to record the dividend?

Exercise E Grant Corporation's stockholders' equity consisted of 60,000 authorized shares of USD 30 par
value common stock, of which 30,000 shares had been issued at par, and retained earnings of USD 750,000. The
company then split its stock, two for one, by changing the par value of the old shares and issuing new USD 15 par
shares.
a. Give the required journal entry to record the stock split.
b. Suppose instead that the company declared and later issued a 10 per cent stock dividend. Give the required
journal entries, assuming that the market value on the date of declaration was USD 40 per share.
Exercise F The balance sheet of Willis Company contains the following:
Appropriation per loan agreement USD 900,000

a. Give the journal entry made to create this account.
b. Explain the reason for the appropriation's existence and its manner of presentation in the balance sheet.
Exercise G Kelly Company had outstanding 50,000 shares of USD 20 stated value common stock, all issued at
USD 24 per share, and had retained earnings of USD 800,000. The company reacquired 2,000 shares of its stock
for cash at book value from the widow of a deceased stockholder.
a. Give the entry to record the reacquisition of the stock.
b. Give the entry to record the subsequent reissuance of this stock at USD 50 per share.

c. Give the entry required if the stock is instead reissued at USD 30 per share and there were no prior treasury
stock transactions.
Exercise H Evan Company received 200 shares of its USD 200 stated value common stock on 2009 December
1, as a donation from a stockholder. On 2009 December 15, it reissued the stock for USD 62,400 cash. Give the
journal entry or entries necessary for these transactions.
Exercise I Vista Company has revenues of USD 80 million, expenses of USD 64 million, a tax-deductible
earthquake loss (its first such loss) of USD 4 million, and a tax-deductible loss of USD 6 million resulting from the
voluntary early extinguishment (retirement) of debt. The assumed income tax rate is 40 per cent. The company's
beginning-of-the-year retained earnings were USD 30 million, and a dividend of USD 2 million was declared.

a. Prepare an income statement for the year.
b. Prepare a statement of retained earnings for the year.
Exercise J Conner Company had retained earnings of USD 56,000 as of 2009 January 1. In 2009, Conner
Company had sales of USD 160,000, cost of goods sold of USD 96,000, and other operating expenses, excluding
taxes, of USD 32,000. In 2009, Conner Company discovered that it had, in error, depreciated land over the last

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