West Yellowstone Outfitters Corporation manufactures and distributes leisure clothing

West Yellowstone Outfitters Corporation manufactures and distributes leisure clothing. Selected transactions completed by West Yellowstone Outfitters during the current fiscal year are as follows:

Jan.
15. Split the common stock 4 for 1 and reduced the par from $120 to $30 per share. After the split, there were 800,000 common shares outstanding.

Mar.
1. Declared semiannual dividends of $0.25 on 100,000 shares of preferred stock and $0.07 on the 800,000 shares of $30 par common stock to stockholders of record on March 31, payable on April 30.

Apr.
30. Paid the cash dividends.

May
31. Purchased 60,000 shares of the corporation’s own common stock at $32, recording the stock at cost.

Aug.
17. Sold 40,000 shares of treasury stock at $38, receiving cash.

Sept.
1. Declared semiannual dividends of $0.25 on the preferred stock and $0.09 on the common stock (before the stock dividend). In addition, a 1% common stock dividend was declared on the common stock outstanding, to be capitalized at the fair market value of the common stock, which is estimated at $40.

Oct.
31. Paid the cash dividends and issued the certificates for the common stock dividend.

Instructions

Journalize the transactions.


Answers:

Jan. 15 No entry required. The stockholders’ ledger would be revised to record the increased number of shares held by each stockholder and new par value.
Mar. 1 Cash Dividends [(100,000 shares × $0.25) + (800,000 shares × $0.07)] 81,000
Cash Dividends Payable 81,000
Apr. 30 Cash Dividends Payable 81,000
Cash 81,000
May 31 Treasury Stock (60,000 shares × $32) 1,920,000
Cash 1,920,000
Aug. 17 Cash (40,000 shares × $38) 1,520,000
Treasury Stock (40,000 shares × $32) 1,280,000
Paid-In Capital from Sale of Treasury
Stock [40,000 shares × ($38 – $32)] 240,000
Sept. 1 Cash Dividends {(100,000 shares × $0.25) + 95,200
[(800,000 shares – 60,000 shares + 40,000 shares) × $0.09]}
Cash Dividends Payable 95,200
1 Stock Dividends [(800,000 shares – 60,000 shares + 40,000 shares) × 312,000
1% × $40]
Stock Dividends Distributable (7,800 shares × $30) 234,000
Paid-In Capital in Excess of Par—
Common Stock [7,800 shares × ($40 – $30)] 78,000
Oct. 31 Cash Dividends Payable 95,200
Cash 95,200
31 Stock Dividends Distributable 234,000
Common Stock 234,000

Nav-Go Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ equity accounts of

Nav-Go Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ equity accounts of Nav-Go Enterprises Inc., with balances on January 1, 2014, are as follows:



Common Stock, $5 stated value (900,000 shares authorized,
620,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,100,000
Paid-In Capital in Excess of Stated Value—Common Stock . . . . . . . . . . . . 1,240,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,875,000
Treasury Stock (48,000 shares, at cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,000


The following selected transactions occurred during the year:

Jan.
15. Paid cash dividends of $0.06 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $34,320.

Mar.
15. Sold all of the treasury stock for $6.75 per share.

Apr.
13. Issued 200,000 shares of common stock for $8 per share.

June
14. Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $7.50 per share.

July
16. Issued the certificates for the dividend declared on June 14.

Oct.
30. Purchased 50,000 shares of treasury stock for $6 per share.

Dec.
30. Declared a $0.08-per-share dividend on common stock.
31. Closed the credit balance of the income summary account, $775,000.
31. Closed the two dividends accounts to Retained Earnings.


Instructions

1. Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends.

2. Journalize the entries to record the transactions, and post to the eight selected accounts.

3. Prepare a retained earnings statement for the year ended December 31, 2014.

4. Prepare the Stockholders’ Equity section of the December 31, 2014, balance sheet.


Answers:

1. and 2.
Common Stock
Jan. 1 Bal. 3,100,000
Apr. 13 1,000,000
July 16 123,000
Dec. 31 Bal. 4,223,000
Paid-In Capital in Excess of Stated Value—Common Stock
Jan. 1 Bal. 1,240,000
Apr. 13 600,000
June 14 61,500
Dec. 31 Bal. 1,901,500
Retained Earnings
Dec. 31 248,068 Jan. 1 Bal. 4,875,000
Dec. 31 775,000
Dec. 31 Bal. 5,401,932
Treasury Stock
288,000
Jan. 1 Bal. 288,000 Mar. 15
Oct. 30 300,000
Dec. 31 Bal. 300,000
Paid-In Capital from Sale of Treasury Stock
Mar. 15 36,000
Stock Dividends Distributable
July 16 123,000 June 14 123,000
Stock Dividends
June 14 184,500 Dec. 31 184,500
Cash Dividends
Dec. 30 63,568 Dec. 31 63,568




2.
Jan. 15 Cash Dividends Payable [(620,000 shares – 48,000 shares) × $0.06] 34,320
Cash 34,320
Mar. 15 Cash (48,000 shares × $6.75) 324,000
Treasury Stock (48,000 shares × $6.00) 288,000
Paid-In Capital from Sale of Treasury Stock 36,000
[48,000 shares × ($6.75 – $6.00)]
Apr. 13 Cash (200,000 shares × $8) 1,600,000
Common Stock (200,000 shares × $5) 1,000,000
Paid-In Capital in Excess of Stated Value—Common Stock 600,000
[200,000 shares × ($8 – $5)]
June 14 Stock Dividends [(620,000 shares + 200,000 shares) × 3% × $7.50] 184,500
Stock Dividends Distributable (24,600 shares × $5) 123,000
Paid-In Capital in Excess of Stated Value—Common Stock 61,500
[24,600 shares × ($7.50 – $5.00)]
July 16 Stock Dividends Distributable 123,000
Common Stock 123,000
Oct. 30 Treasury Stock (50,000 shares × $6) 300,000
Cash 300,000
Dec. 30 Cash Dividends [(620,000 shares + 200,000 shares + 24,600 shares – 63,568
50,000 shares) × $0.08]
Cash Dividends Payable 63,568
31 Income Summary 775,000
Retained Earnings 775,000
31 Retained Earnings 248,068
Stock Dividends 184,500
Cash Dividends 63,568



NAV-GO ENTERPRISES INC.
Retained Earnings Statement
For the Year Ended December 31, 2014
Retained earnings, January 1, 2014 $4,875,000
Net income $ 775,000
Less: Cash dividends (63,568)
Stock dividends (184,500)
Increase in retained earnings 526,932
Retained earnings, December 31, 2014 $5,401,932
4.
Stockholders’ Equity
Paid-in capital:
Common stock, $5 stated value (900,000 shares
authorized, 844,600 shares issued) $4,223,000
Excess of issue price over stated value 1,901,500
From sale of treasury stock 36,000
Total paid-in capital $ 6,160,500
Retained earnings 5,401,932
Total $11,562,432
Deduct treasury stock (50,000 shares at cost) 300,000
Total stockholders’ equity $11,262,432

Diamondback Welding & Fabrication Corporation sells and services pipe welding equipment in Illinois

Diamondback Welding & Fabrication Corporation sells and services pipe welding equipment in Illinois. The following selected accounts appear in the ledger of Diamondback Welding & Fabrication Corporation on July 1, 2014, the beginning of the current fiscal year:




Preferred 2% Stock, $80 par (100,000 shares authorized,
60,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,800,000
Paid-In Capital in Excess of Par—Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,000
Common Stock, $9 par (3,000,000 shares authorized,
1,750,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,750,000
Paid-In Capital in Excess of Par—Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,400,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,840,000


During the year, the corporation completed a number of transactions affecting the
stockholders’ equity. They are summarized as follows:
a. Purchased 87,500 shares of treasury common for $8 per share.
b. Sold 55,000 shares of treasury common for $11 per share.
c. Issued 20,000 shares of preferred 2% stock at $84.
d. Issued 400,000 shares of common stock at $13, receiving cash.
e. Sold 18,000 shares of treasury common for $7.50 per share.
f. Declared cash dividends of $1.60 per share on preferred stock and $0.05 per share on common stock.
g. Paid the cash dividends.

Instructions

Journalize the entries to record the transactions. Identify each entry by letter.


Answers:

a. Treasury Stock (87,500 shares × $8) 700,000
Cash 700,000
b. Cash (55,000 shares × $11) 605,000
Treasury Stock (55,000 shares × $8) 440,000
Paid-In Capital from Sale of Treasury Stock 165,000
[55,000 shares × ($11 – $8)]
c. Cash (20,000 shares × $84) 1,680,000
Preferred Stock (20,000 shares × $80) 1,600,000
Paid-In Capital in Excess of Par—Preferred
Stock [20,000 shares × ($84 – $80)] 80,000
d. Cash (400,000 shares × $13) 5,200,000
Common Stock (400,000 shares × $9) 3,600,000
Paid-In Capital in Excess of Par—Common
Stock [400,000 shares × ($13 – $9)] 1,600,000
e. Cash (18,000 shares × $7.50) 135,000
Paid-In Capital from Sale of Treasury Stock 9,000
[18,000 shares × ($8.00 – $7.50)]
Treasury Stock (18,000 shares × $8) 144,000
f. Cash Dividends {(80,000 shares × $1.60) + [(1,750,000 shares – 234,775
87,500 shares + 55,000 shares + 400,000 shares +
18,000 shares) × $0.05]}
Cash Dividends Payable 234,775
g. Cash Dividends Payable 234,775
Cash 234,775

Pulsar Optics produces medical lasers for use in hospitals. The accounts and their balances appear

Pulsar Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of Pulsar Optics on April 30 of the current year as follows:



Preferred 1% Stock, $120 par (300,000 shares authorized,
36,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,320,000
Paid-In Capital in Excess of Par—Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . 180,000
Common Stock, $15 par (2,000,000 shares authorized,
1,400,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000,000
Paid-In Capital in Excess of Par—Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,000,000


At the annual stockholders’ meeting on August 5, the board of directors presented a
plan for modernizing and expanding plant operations at a cost of approximately $9,000,000. The plan provided (a) that the corporation borrow $1,500,000, (b) that 20,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that a building, valued at $4,150,000, and the land on which it is located, valued at $800,000, be acquired in accordance with preliminary negotiations by the issuance of 300,000 shares of common stock. The plan was approved by the stockholders and accomplished by the following transactions:

Oct.
9. Borrowed $1,500,000 from St. Peter City Bank, giving a 4% mortgage note.
17. Issued 20,000 shares of preferred stock, receiving $126 per share in cash.
28. Issued 300,000 shares of common stock in exchange for land and a building,
according to the plan.

Instructions

Journalize the entries to record the October transactions.


Answers:

Oct. 9 Cash 1,500,000
Mortgage Note Payable 1,500,000
17 Cash (20,000 shares × $126) 2,520,000
Preferred Stock (20,000 shares × $120) 2,400,000
Paid-In Capital in Excess of Par—
Preferred Stock [20,000 shares × ($126 – $120)] 120,000
28 Building 4,150,000
Land 800,000
Common Stock (300,000 shares × $15) 4,500,000
Paid-In Capital in Excess of Par—
Preferred Stock [300,000 shares × ($16.50 – $15.00)] 450,000

Yosemite Bike Corp. manufactures mountain bikes and distributes them through retail outlets in California

Yosemite Bike Corp. manufactures mountain bikes and distributes them through retail

outlets in California, Oregon, and Washington. Yosemite Bike Corp. has declared the
following annual dividends over a six-year period ended December 31 of each year:
2009, $24,000; 2010, $10,000; 2011, $126,000; 2012, $100,000; 2013, $125,000; and 2014, $125,000. During the entire period, the outstanding stock of the company was composed of 25,000 shares of cumulative preferred 2% stock, $90 par, and 100,000 shares of common stock, $4 par.


Instructions
1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, 2009. Summarize the data in tabular form, using the following column headings:

YearTotalDividendsPreferred Dividends Common DividendsTotal Per Share Total Per Share2009 $ 24,0002010 10,0002011 126,0002012 100,0002013 125,0002014 125,000
2. Determine the average annual dividend per share for each class of stock for the sixyear period.
3. Assuming a market price of $100 for the preferred stock and $5 for the common stock, calculate the average annual percentage return on initial shareholders’ investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.

Answers:1. PreferredDividends CommonDividendsTotal Per PerYear Dividends Total Share Total Share2009…………… $ 24,000 $ 24,000 $ 0.96 $ 0 $0.002010………… 10,000 10,000 0.40 0 0.002011…………… 126,000 101,000* 4.04 25,000 0.252012………… 100,000 45,000 1.80 55,000 0.552013…………… 125,000 45,000 1.80 80,000 0.802014………… 125,000 45,000 1.80 80,000 0.80$10.80 $2.40* $101,000 = (2009 dividends in arrears of $11,000) +(2010 dividends in arrears of $45,000) +(2011 current dividend of $45,000)


2.Average annual dividend for preferred: $1.80 per share ($10.80 ÷ 6)Average annual dividend for common: $0.40 per share ($2.40 ÷ 6)
3.a. 1.8% ($1.80 ÷ $100)b. 8.0% ($0.40 ÷ $5.00)

Selected transactions completed by Primo Discount Corporation during the current fiscal year are as follows:

Selected transactions completed by Primo Discount Corporation during the current fiscal year are as follows:

Jan.
9. Split the common stock 3 for 1 and reduced the par from $75 to $25 per
share. After the split, there were 1,200,000 common shares outstanding.

Feb.
28. Purchased 40,000 shares of the corporation’s own common stock at $28,
recording the stock at cost.

May
1. Declared semiannual dividends of $0.80 on 75,000 shares of preferred stock
and $0.12 on the common stock to stockholders of record on June 1, payable on July 10.

July
10. Paid the cash dividends.

Sept.
7. Sold 30,000 shares of treasury stock at $34, receiving cash.

Oct.
1. Declared semiannual dividends of $0.80 on the preferred stock and $0.12 on
the common stock (before the stock dividend). In addition, a 2% common
stock dividend was declared on the common stock outstanding. The fair market
value of the common stock is estimated at $36.

Dec.
1. Paid the cash dividends and issued the certificates for the common stock dividend.

Instructions

Journalize the transactions.


Answers:

Jan. 9 No entry required. The stockholders’ ledger would be revised to
record the increased number of shares held by each stockholder and new par value.
Feb. 28 Treasury Stock (40,000 shares × $28) 1,120,000
Cash 1,120,000
May 1 Cash Dividends {(75,000 shares × $0.80) + [(1,200,000 shares – 199,200
40,000 shares) + $0.12]}
Cash Dividends Payable 199,200
July 10 Cash Dividends Payable 199,200
Cash 199,200
Sept. 7 Cash (30,000 shares × $34) 1,020,000
Treasury Stock (30,000 shares × $28) 840,000
Paid-In Capital from Sale of Treasury
Stock [30,000 shares × ($34 – $28)] 180,000
Oct. 1 Cash Dividends {(75,000 shares × $0.80) + [(1,200,000 shares – 202,800
10,000 shares) × $0.12]}
Cash Dividends Payable 202,800
1 Stock Dividends [(1,200,000 shares – 10,000 shares) × 2% × $36] 856,800
Stock Dividends Distributable (23,800 shares × $25) 595,000
Paid-In Capital in Excess of Par—
Common Stock [23,800 shares × ($36 – $25)] 261,800
Dec. 1 Cash Dividends Payable 202,800
Cash 202,800
1 Stock Dividends Distributable 595,000
Common Stock 595,000

Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Morrow Enterprises Inc.

Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Morrow Enterprises Inc., with balances on January 1, 2014, are as follows:



Common Stock, $20 stated value (500,000 shares
authorized, 375,000 shares issued). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,500,000
Paid-In Capital in Excess of Stated Value—Common Stock. . . . . . . . . . . . . 825,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,600,000
Treasury Stock (25,000 shares, at cost). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000


The following selected transactions occurred during the year:
Jan.
22. Paid cash dividends of $0.08 per share on the common stock. The dividend
had been properly recorded when declared on December 1 of the preceding
fiscal year for $28,000.

Apr.
10. Issued 75,000 shares of common stock for $24 per share.

June
6. Sold all of the treasury stock for $26 per share.

July
5. Declared a 4% stock dividend on common stock, to be capitalized at the market
price of the stock, which is $25 per share.

Aug.
15. Issued the certificates for the dividend declared on July 5.

Nov.
23. Purchased 30,000 shares of treasury stock for $19 per share.

Dec.
28. Declared a $0.10-per-share dividend on common stock.
31. Closed the credit balance of the income summary account, $1,125,000.
31. Closed the two dividends accounts to Retained Earnings.

Instructions

1. Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends.

2. Journalize the entries to record the transactions, and post to the eight selected accounts.

3. Prepare a retained earnings statement for the year ended December 31, 2014.

4. Prepare the Stockholders’ Equity section of the December 31, 2014, balance sheet.


Answers:

1. and 2.
Common Stock
Jan. 1 Bal. 7,500,000
Apr. 10 1,500,000
Aug. 15 360,000
Dec. 31 Bal. 9,360,000
Paid-In Capital in Excess of Stated Value—Common Stock
Jan. 1 Bal. 825,000
Apr. 10 300,000
July 5 90,000
Dec. 31 Bal. 1,215,000
Retained Earnings
Dec. 31 493,800 Jan. 1 Bal. 33,600,000
Dec. 31 1,125,000
Dec. 31 Bal. 34,231,200
Treasury Stock
Jan. 1 Bal. 450,000 June 6
Nov. 23 570,000
Dec. 31 Bal. 570,000
450,000
Paid-In Capital from Sale of Treasury Stock
June 6 200,000
Stock Dividends Distributable
Aug. 15 360,000 July 5 360,000
Stock Dividends
July 5 450,000 Dec. 31 450,000
Cash Dividends
Dec. 28 43,800 Dec. 31 43,800


2.
Jan. 22 Cash Dividends Payable [(375,000 shares – 25,000 shares) × $0.08] 28,000
Cash 28,000
Apr. 10 Cash (75,000 shares × $24) 1,800,000
Common Stock (75,000 shares × $20) 1,500,000
Paid-In Capital in Excess of Stated Value—Common Stock 300,000
[75,000 shares × ($24 – $20)]
June 6 Cash (25,000 shares × $26) 650,000
Treasury Stock (25,000 shares × $18) 450,000
Paid-In Capital from Sale of Treasury Stock 200,000
[25,000 shares × ($26 – $18)]
July 5 Stock Dividends [(375,000 shares + 75,000 shares) × 4% × $25] 450,000
Stock Dividends Distributable (18,000 shares × $20) 360,000
Paid-In Capital in Excess of Stated Value—Common Stock 90,000
[18,000 shares × ($25 – $20)]
Aug. 15 Stock Dividends Distributable 360,000
Common Stock 360,000
Nov. 23 Treasury Stock (30,000 shares × $19) 570,000
Cash 570,000
Dec. 28 Cash Dividends [(375,000 shares + 75,000 shares + 18,000 shares – 43,800
30,000 shares) × $0.10]
Cash Dividends Payable 43,800
31 Income Summary 1,125,000
Retained Earnings 1,125,000
31 Retained Earnings 493,800
Stock Dividends 450,000
Cash Dividends 43,800



3.
MORROW ENTERPRISES INC.
Retained Earnings Statement
For the Year Ended December 31, 2014
Retained earnings, January 1, 2014 $33,600,000
Net income $1,125,000
Less: Cash dividends (43,800)
Stock dividends (450,000)
Increase in retained earnings 631,200
Retained earnings, December 31, 2014 $34,231,200
4.
Stockholders’ Equity
Paid-in capital:
Common stock, $20 stated value (500,000 shares
authorized, 468,000 shares issued) $9,360,000
Excess of issue price over stated value 1,215,000
From sale of treasury stock 200,000
Total paid-in capital $10,775,000
Retained earnings 34,231,200
Total $45,006,200
Deduct treasury stock (30,000 shares at cost) 570,000
Total stockholders’ equity $44,436,200

The following selected accounts appear in the ledger of Orion Inc. on February 1, 2014, the beginning of the current fiscal year

The following selected accounts appear in the ledger of Orion Inc. on February 1, 2014, the beginning of the current fiscal year:



Preferred 1% Stock, $40 par (75,000 shares authorized,
45,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,800,000
Paid-In Capital in Excess of Par—Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,000
Common Stock, $12 par (2,000,000 shares authorized,
1,250,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000,000
Paid-In Capital in Excess of Par—Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,750,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,450,000


During the year, the corporation completed a number of transactions affecting the stockholders’ equity. They are summarized as follows:

a. Issued 360,000 shares of common stock at $22, receiving cash.

b. Issued 14,000 shares of preferred 1% stock at $43.

c. Purchased 66,000 shares of treasury common for $18 per share.

d. Sold 51,000 shares of treasury common for $21 per share.

e. Sold 10,000 shares of treasury common for $16 per share.

f. Declared cash dividends of $0.40 per share on preferred stock and $0.03 per share on common stock.

g. Paid the cash dividends.


Instructions

Journalize the entries to record the transactions. Identify each entry by letter.


Answers:

a. Cash (360,000 shares × $22) 7,920,000
Common Stock (360,000 shares × $12) 4,320,000
Paid-In Capital in Excess of Par—Common
Stock [360,000 shares × ($22 – $12)] 3,600,000
b. Cash (14,000 shares × $43) 602,000
Preferred Stock (14,000 shares × $40) 560,000
Paid-In Capital in Excess of Par—Preferred
Stock [14,000 shares × ($43 – $40)] 42,000
c. Treasury Stock (66,000 shares × $18) 1,188,000
Cash 1,188,000
d. Cash (51,000 shares × $21) 1,071,000
Treasury Stock (51,000 shares × $18) 918,000
Paid-In Capital from Sale of Treasury Stock 153,000
[51,000 shares × ($21 – $18)]
e. Cash (10,000 shares × $16) 160,000
Paid-In Capital from Sale of Treasury Stock 20,000
[10,000 shares × ($18 – $16)]
Treasury Stock (10,000 shares × $18) 180,000
f. Cash Dividends {(59,000 shares × $0.40) + [(1,250,000 shares + 71,750
360,000 shares – 66,000 shares + 51,000 shares +
10,000 shares) × 0.03]}
Cash Dividends Payable 71,750
g. Cash Dividends Payable 71,750
Cash 71,750

On December 1 of the current year, the following accounts and their balances appear in the ledger of Latte Corp., a coffee processor:

On December 1 of the current year, the following accounts and their balances appear in the ledger of Latte Corp., a coffee processor:


Preferred 2% Stock, $50 par (250,000 shares authorized,
80,000 shares issued). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,000,000
Paid-In Capital in Excess of Par—Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560,000
Common Stock, $35 par (1,000,000 shares authorized,
400,000 shares issued). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000,000
Paid-In Capital in Excess of Par—Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000
Retained Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000,000


At the annual stockholders’ meeting on March 31, the board of directors presented
a plan for modernizing and expanding plant operations at a cost of approximately
$11,000,000. The plan provided (a) that a building, valued at $3,375,000, and the land on which it is located, valued at $1,500,000, be acquired in accordance with preliminary negotiations by the issuance of 125,000 shares of common stock, (b) that 40,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that the corporation borrow $4,000,000. The plan was approved by the stockholders and accomplished by the following transactions:

May
11. Issued 125,000 shares of common stock in exchange for land and a building,
according to the plan.

20. Issued 40,000 shares of preferred stock, receiving $52 per share in cash.

31. Borrowed $4,000,000 from Laurel National, giving a 5% mortgage note.

Instructions

Journalize the entries to record the May transactions.


Answers:

May 11 Building 3,375,000
Land 1,500,000
Common Stock (125,000 shares × $35) 4,375,000
Paid-In Capital in Excess of Par—
Common Stock [125,000 shares × ($39 – $35)] 500,000
20 Cash (40,000 shares × $52) 2,080,000
Preferred Stock (40,000 shares × $50) 2,000,000
Paid-In Capital in Excess of Par—
Preferred Stock [40,000 shares × ($52 – $50)] 80,000
31 Cash 4,000,000
Mortgage Note Payable 4,000,000

Partridge Theatre Inc. owns and operates movie theaters throughout Texas and Oklahoma. Partridge Theatre Inc

Partridge Theatre Inc. owns and operates movie theaters throughout Texas and
Oklahoma. Partridge Theatre Inc. has declared the following annual dividends over a sixyear period: 2009, $18,000; 2010, $40,000; 2011, $80,000; 2012, $120,000; 2013, $150,000; and 2014, $228,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative, preferred 1% stock, $75 par, and 200,000 shares of common stock, $5 par.

Instructions

1. Calculate the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, 2009. Summarize the data in tabular form, using the following column headings:


Year
Total
Dividends
Preferred Dividends Common Dividends
Total Per Share Total Per Share
2009 $ 18,000
2010 40,000
2011 80,000
2012 120,000
2013 150,000
2014 228,000

2. Calculate the average annual dividend per share for each class of stock for the six-year period.

3. Assuming a market price per share of $125 for the preferred stock and $7.60 for the common stock, calculate the average annual percentage return on initial shareholders’ investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.


Answers:

1.
Year
Preferred Dividends Common Dividends
Total Per Per
Dividends Total Share Total Share
2009…………… $ 18,000 $18,000 $0.45 $ 0 $0.00
2010………… 40,000 40,000 1.00 0 0.00
2011…………… 80,000 32,000* 0.80 48,000 0.24
2012………… 120,000 30,000 0.75 90,000 0.45
2013…………… 150,000 30,000 0.75 120,000 0.60
2014………… 228,000 30,000 0.75 198,000 0.99
$4.50 $2.28
* $32,000 = (2010 dividends in arrears of $2,000) + (2011 current dividend of $30,000)



2.
Average annual dividend for preferred: $0.75 per share ($4.50 ÷ 6)
Average annual dividend for common: $0.38 per share ($2.28 ÷ 6)

3.
a. 0.60% ($0.75 ÷ $125)
b. 5.0% ($0.38 ÷ $7.60)