Page 555 - Accounting Principles (A Business Perspective)

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

2.
Retained earnings 48,000
Reserve for depreciation 48,000
To record depreciation expense.
3.
Retained earnings 120,000
Appropriation for plant expansion 120,000
To record retained earnings appropriation.
4.
Retained earnings 8,000
Stock dividend distributable – Common 8,000
To record 10% stock dividend declaration
(100 shares to be distributed - $80 par
value, $120 market value).
5.
Stock dividend distributable – Common 8,000
Common stock 8,000
To record distribution of stock dividend.
6.
Treasury Stock 32,000
Cash 32,000
To record acquisition of 200 shares of $80
par value common stock at $160 per share.
7.
Cash 17,600
Treasury Stock 17,600
To record sale of 100 treasury shares at
$176 per share.
8.
Cash 6,800
Treasury stock 6,800
To record sale of 50 treasury shares at
$136 per share.
9.
Common stock 16,000
Dividends payable 16,000
To record declaration of cash dividend.
10.
Dividends payable 16,000
Cash 16,000
To record payment of cash dividend.
The management of Keel Corporation has asked you, a CPA, to analyze these journal entries and decide whether

each is correct. The explanations are all correct. Wherever a journal entry is incorrect, prepare the journal entry
that should have been made.
Annual report analysis C The following questions are based on the Coca-Cola Company's 2006 annual
report. To view the report, go to the Coca-Cola web site at www.cocacola.com. After you activate the web site, click
on The Coca-Cola Company. Go to investors and a menu will drop down that has financials as an option with
Financial Statements (select this) to its right. Click on Balance Sheet and then open it to find the total cost of
treasury shares. Then go to Selected Financial Data and open it to find the number of common shares outstanding.

a. Based on the information in the balance sheet and the note, determine the number of common shares
outstanding; and the total cost of treasury stock shares on hand at the end of 2006.
b. In writing, discuss what reasons Coca-Cola might have to acquire treasury stock.
c. Find Coca-Cola's basic EPS for 2006 listed in its Income Statement. If the common stock's market price at
2006 December 31, was USD 30, what was the price-earnings ratio?
Ethics case–Writing experience D Based on the ethics case, answer the following questions concerning Ace
Chemical Company in writing:
a. Is this transaction fair to the creditors?

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