Page 548 - Accounting Principles (A Business Perspective)

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three years resulting in a balance in the accumulated depreciation account of USD 40,000. The assumed tax rate for
Conner Company is 40 per cent. Present in proper form a statement of retained earnings for the year ended 2009
December 31.

Exercise K The following information relates to Perry Corporation for the year ended 2009 December 31:
Common stock outstanding 75,000 shares
Income from continuing operations $1,523,200
Loss on discontinued operations (net of
tax) 240,000
Extraordinary gain (net of tax) 144,000
Calculate EPS for the year ended 2009 December 31. Present the information in the same format used in the
corporation's income statement.
Exercise L Dean Company had an average number of shares of common stock outstanding of 200,000 in 2009
and 215,000 in 2010. Net income for these two years was as follows:
2009 $2,208,000
2010 2,304,000
a. Calculate EPS for the years ended 2009 December 31, and 2010.
b. What might the resulting figures tell a stockholder or a potential investor?

Problems
Problem A The bookkeeper of Hart Company has prepared the following incorrect statement of stockholders'
equity for the year ended 2009 December 31:
Stockholders' equity:
Paid-In Capital:
Preferred stock – 6%, cumulative (8,000 $1,003,200
shares)
Common stock – 50,000 shares 2,856,000
Total paid-in capital $3,859,200
Retained earnings 1,636,800
Total stockholders' equity $5,496,000
The authorized stock consists of 12,000 shares of preferred stock with a USD 120 par value and 75,000 shares of

common stock, USD 48 par value. The preferred stock was issued on two occasions: (1) 5,000 shares at par, and (2)
3,000 shares at USD 134.40 per share. The 50,000 shares of common stock were issued at USD 62.40 per share.
Five thousand shares of treasury common stock were reacquired for USD 264,000. The bookkeeper deducted the
cost of the treasury stock from the Common Stock account.
Prepare the correct stockholders' equity section of the balance sheet at 2009 December 31.
Problem B The only stockholders' equity items of Jody Company at 2009 June 30, are:
Stockholders' equity:
Paid-in capital:
Common stock - $200 par value, 10,000 $1,200,000
shares authorized, 6,000 shares issued and
outstanding
Paid-in capital in excess of par value 480,000
Total paid-in capital $1,680,000
Retained earnings 480,000
Total stockholders' equity $2,160,000
On 2009 August 4, a 4 per cent cash dividend was declared, payable on September 3. On November 16, a 10 per
cent stock dividend was declared. The shares were issued on December 1. The market value of the common stock
was USD 360 per share on November 16 and USD 354 per share on December 1.
Prepare journal entries for these dividend transactions.
Problem C Following are selected transactions of White Corporation:

Accounting Principles: A Business Perspective 549 A Global Text