Brief Exercise 13-4

Week 4

Brief Exercise 13-4

On June 1, Noonan Inc. issues 4,000 shares of no-par common stock at a cash price of $6 per share. Journalize the issuance of the shares assuming the stock has a stated value of $1 per share. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Cash = Issues shares x cash price = 4,000 x 6 = 24,000

Common Stock = Issues shares x stated value = 4,000 x 1 = 4,000

Paid-in Capital in Excess of Stated Value—Common Stock = 4,000 x 5(6-1) = 20,000

Account titles and explanationDebtCredit
Cash24,000 
Common Stock 4,000
Paid-in Capital in Excess of Stated Value—Common Stock 20,000

Brief Exercise 13-7

Garb Inc. issues 5,000 shares of $100 par value preferred stock for cash at $130 per share. Journalize the issuance of the preferred stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Cash =5,000 x 130 = 650,000

Preferred stock =5,000 x 100 = 500,000

Paid-in Capital in Excess of Par—Preferred Stock =5,000 x 30(130-100) = 150,000

Account titles and explanationDebtCredit
Cash650,000 
Common Stock 500,000
Paid-in Capital in Excess of Par-Preferred Stock 150,000

Brief Exercise 13-8

Pine Corporation has the following accounts at December 31: Common Stock, $10 par, 5,000 shares issued, $50,000; Paid-in Capital in Excess of Par—Common Stock $30,000; Retained Earnings $45,000; and Treasury Stock, 500 shares, $11,000.

Prepare the stockholders’ equity section of the balance sheet. (Enter the account name only and do not provide the descriptive information provided in the question.)

Common stock, $10 par value, 5,000 shares issued and 4,500 shares outstanding = 5000 x 10 = 50,000

Treasury stock (500 common shares) = 11,000

Pine Corporation balance sheet December 31
Stockholders’ equity 
Paid-in Capital 
Capital Stock 
Common Stock50,000
Additional Paid-in Stock 
Paid-in Capital in Excess of Par—Common Stock30,000
Total paid in Capital  = 50,000 + 30,000 =80,000
Retained Earnings4,500
Total paid in Capital and Retained Earnings = 80,000 + 45,000(4,500 x 10) =125,000
LessTreasury Stock11,000?
Total Stockholders’ equity = 125,000 -11,000 = 114,000
   

Exercise 13-2

Andrea has prepared the following list of statements about corporations.Identify each statement as true or false.

1.      Corporation management is both an advantage and a disadvantage of a corporation compared to a proprietorship or a partnership. True

2.      Limited liability of stockholders, government regulations, and additional taxes are the major disadvantages of a corporation. False

3.      When a corporation is formed, organization costs are recorded as an asset. = False

4.      Each share of common stock gives the stockholder the ownership rights to vote at stockholder meetings, share in corporate earnings, keep the same percentage ownership when new shares of stock are issued, and share in assets upon liquidation. True

5.      The number of issued shares is always greater than or equal to the number of authorized shares. False

6.      A journal entry is required for the authorization of capital stock. False

7.      Publicly held corporations usually issue stock directly to investors. False

8.      The trading of capital stock on a securities exchange involves the transfer of already issued shares from an existing stockholder to another investor. True

9.      The market price of common stock is usually the same as its par value. False

10.  Retained earnings are the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock. False

                Exercise 13-4

Osage Corporation issued 2,000 shares of stock. Prepare the entry for the issuance under the following assumptions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

a) The stock had a par value of $5 per share and was issued for a total of $52,000.

b) The stock had a stated value of $5 per share and was issued for a total of $52,000.

c) The stock had no par or stated value and was issued for a total of $52,000.

d) The stock had a par value of $5 per share and was issued to attorneys for services during incorporation valued at $52,000.

e) The stock had a par value of $5 per share and was issued for land worth $52,000.

Common Stock = 2,000 x 5 = 10,000

a)

Account titles and explanationDebtCredit
Cash52,000 
Common Stock 10,000
Paid-in Capital in Excess of Par-Common Stock  = 52,00 – 10,000 = 42,000

b)

Account titles and explanationDebtCredit
Cash52,000 
Common Stock 10,000
Paid-in Capital in Excess of Stated Value-Common Stock  = 52,00 – 10,000 = 42,000

c)

Account titles and explanationDebtCredit
Cash52,000 
Common Stock 52,000

d)

Account titles and explanationDebtCredit
Organization Expense52,000 
Common Stock 10,000
Paid-in Capital in Excess of Stated Value-Common Stock  = 52,00 – 10,000 = 42,000

e)

Account titles and explanationDebtCredit
Land52,000 
Common Stock 10,000
Paid-in Capital in Excess of Stated Value-Common Stock  = 52,00 – 10,000 = 42,000

Exercise 13-7 (Part level Submission

On January 1, 2014, the stockholders’ equity section of Newlin Corporation shows common stock ($5 par value) $1,500,000; paid-in capital in excess of par $1,000,000; and retained earnings $1,200,000. During the year, the following treasury stock transactions occurred.

Mar. 1 Purchased 50,000 shares for cash at $15 per share.

July. 1 Sold 10,000 treasury shares for cash at $17 per share.

Sept.1 Sold 8,000 treasury shares for cash at $14 per share.

a) Journalize the treasury stock transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Mar. 1

Account titles and explanationDebtCredit
Treasury Stock750,000 
Cash 750,000

Treasury Stock = 50,000 ×15 =750,000

July. 1

Account titles and explanationDebtCredit
Cash170,000 
Treasury Stock 150,000
Paid-in Capital from Treasury Stock 20,000

Cash = 10,000 × 17 = 170,000

Treasury Stock =10,000 × 15 = 150,000

Paid-in Capital from Treasury Stock =10,000 × 2 = 20,000

Sept.1

Account titles and explanationDebtCredit
Cash112,000 
Paid-in Capital from Treasury Stock8,000 
Treasury Stock 120,000

Cash = 8,000 × 14 =112,000

Treasury Stock =8,000 × 15= 120,000

Paid-in Capital from Treasury Stock =8,000 × 1= 8,000

b) Restate the entry for September 1, assuming the treasury shares were sold at $12 per share. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Sept.1

Account titles and explanationDebtCredit
Cash96000 
Paid-in Capital from Treasury Stock20,000 
Retained Earnings4,000
Treasury Stock 120000

Cash  = 8,000 × 12 =96000

Treasury Stock =8,000 × 15= 120,000

Problem 13-1A (Part level Submission)

DeLong Corporation was organized on January 1, 2014. It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 500,000 shares of no-par common stock with a stated value of $2 per share. The following stock transactions were completed during the first year.

Jan. 10 Issued 80,000 shares of common stock for cash at $4 per share.

Mar. 1 Issued 5,000 shares of preferred stock for cash at $105 per share.

Apr. 1 Issued 24,000 shares of common stock for land. The asking price of the land was $90,000. The fair value of the land was $85,000.

May. 1 Issued 80,000 shares of common stock for cash at $4.5 per share.

Aug. 1 Issued 10,000 shares of common stock to attorneys in payment of their bill of $30,000 for services performed in helping the company organize.

Sept. 1 Issued 10,000 shares of common stock for cash at $5 per share.

Nov. 1 Issued 1,000 shares of preferred stock for cash at $109 per share.

A) Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Jan. 10

Account titles and explanationDebtCredit
Cash  =80,000 x 4320,000 
Common stock =80,000 x 2 ($4-$2) 160,000
Paid-in Capital in Excess of Stated Value-Common Stock = 80,000 x 2 160,000

Mar. 1

Account titles and explanationDebtCredit
Cash525000 
Preferred stock 500,000
Paid-in Capital in Excess of Par-Preferred Stock 25,000

Cash = 5,000 x 105 =525000

Preferred Stock = 5,000 x 100 =500,000

Paid-in Capital in Excess of Par-Preferred Stock = 5,000 x 5 =25,000

Apr. 1

Account titles and explanationDebtCredit
Land85,000 
Common stock 48,000
Paid-in Capital in Excess of Stated Value-Common Stock 37,000

Common Stock = 24,000 x 2 =48,000

Paid-in Capital in Excess of Stated Value-Common Stock =85,000 – 48,000 =37,000

May. 1

Account titles and explanationDebtCredit
Cash360,000 
Common stock 160,000
Paid-in Capital in Excess of Stated Value-Common Stock 200,000

Cash = 80,000 x 4.5 = 360,000

Common Stock = 80,000 x 2 = 160,000

Paid-in Capital in Excess of Stated Value-Common Stock = 80,000 x 2.50 =200,000

Aug. 1

Account titles and explanationDebtCredit
Organization Expense30,000 
Common stock 20,000
Paid-in Capital in Excess of Stated Value-Common Stock 10,000

Common Stock =10,000 x 2 = 20,000

Paid-in Capital in Excess of Stated Value-Common Stock = 30,000 – 20,000 =10,000

Sept. 1

Account titles and explanationDebtCredit
Cash50,000 
Common stock 20,000
Paid-in Capital in Excess of Stated Value-Common Stock 30,000

Cash = 10,000 x 5 = 50,000

Common Stock = 10,000 x 2= 20,000

Paid-in Capital in Excess of Stated Value-Common Stock = 10,000 x 3 = 30,000

Nov. 1

Account titles and explanationDebtCredit
Cash109,000 
Preferred Stock 100,000
Paid-in Capital in Excess of Par-Preferred Stock 9,000

Cash = 1,000 x 109=109,000

Preferred Stock = 1,000 x 100=100,000

Paid-in Capital in Excess of Par-Preferred Stock = 1,000 x 9=9,000

B) Post to the stockholders’ equity accounts. (Post entries in the order of journal entries presented in the previous part.)

Preferred Stock

DateDebtCreditBalance
Mar. 1500,000500,000
Nov. 1  100,000600,000

Common Stock

DateDebtCreditBalance
Jan. 10160,000160000
Apr. 1 48,000208,000
May. 1 160,000368,000
Aug. 1 20,000388,000
Sept. 1 20,000408,000

Paid-in Capital in Excess of Par-Preferred Stock

DateDebtCreditBalance
Mar. 125,00025,000
Nov. 1  9,00034,000

Paid-in Capital in Excess of Stated Value-Common Stock

DateDebtCreditBalance
Jan. 10160,000160000
Apr. 1 37000197,000
May. 1 200,000397,000
Aug. 1 10,000407,000
Sept. 1 30,000437,000

C)Prepare the paid-in capital section of stockholders’ equity at December 31, 2014. (Enter the account name only and do not provide the descriptive information provided in the question.)

DeLong Corporation Balance sheet (partial) December 31, 2014

Paid-in capital  
Capital stock
Preferred Stock 600,000
Common Stock 408,000
Total Capital stock 1008000
Additional Paid-in capital  
Paid-in Capital in Excess of Stated Value-Common Stock437,000 
Paid-in Capital in Excess of Par-Preferred Stock34,000 
Total Additional Paid-in capital 471,000
 Total Paid-in Capital  1479,000

Brief Exercise 13-3

On May 10, Jack Corporation issues 3,400 shares of $12 par value common stock for cash at $22 per share. Journalize the issuance of the stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

May. 1

Account titles and explanationDebtCredit
Cash74,800 
Common stock 40,800
Paid-in Capital in Excess of Par-Common Stock 34,000

Cash = 3,400 x 22 = 74,800

Common Stock = 3,400 x 12 = 40,800

Paid-in Capital in Excess of Par-Common Stock = 3,400 x 10(22-12) = 34,000

Brief Exercise 13-5

Lei Inc.’s $11 par value common stock is actively traded at a market price of $16 per share. Lei issue 4,900 shares to purchase land advertised for sale at $74,980. Journalize the issuance of the stock in acquiring the land. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account titles and explanationDebtCredit
Land74,800 
Common stock 53900
Paid-in Capital in Excess of Par-Common Stock 24,500

Cash = 74,980

Common Stock = 4,900 x 11 = 53900

Paid-in Capital in Excess of Par-Common Stock = 4,900 x 6(16-11) = 24,500

Brief Exercise 13-6

On July 1, Raney Corporation purchases 590 shares of its $6 par value common stock for the treasury at a cash price of $9 per share. On September 1, it sells 300 shares of the treasury stock for cash at $13 per share.

Journalize the two treasury stock transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

July 1

Account titles and explanationDebtCredit
Treasury stock5310 
Cash 5310

Treasury stock = 590 x 9 =5,310

September 1

Account titles and explanationDebtCredit
Cash3,900 
Treasury stock 2700
Paid-in Capital from Treasury Stock 1200

Cash = 300 x 13 = 3,900

Treasury Stock = 300 x 9 = 2,700

Paid-in Capital from Treasury Stock = 300 x 4(13-9) =1200

Exercise 13-3

During its first year of operations, Foyle Corporation had the following transactions pertaining to its common stock.

Jan. 10 Issued 66,400 shares for cash at $6 per share.

July. 1 Issued 42,500 shares for cash at $8 per share

A) Journalize the transactions, assuming that the common stock has a par value of $6 per share. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Jan. 10

Account titles and explanationDebtCredit
Cash398,400 
Common Stock 398,400

Cash = 66,400 x 6 = 398,400

July 1

Account titles and explanationDebtCredit
Cash340,000 
Common Stock 255,000
Paid-in Capital in Excess of Par-Common Stock  85,000

Cash = 42,500 x 8= 340,000

Common Stock = 42,500 x 6 = 255,000

Paid-in Capital in Excess of Par-Common Stock = 42,500 x 2(8-6) =85,000

B) Journalize the transactions, assuming that the common stock is no-par with a stated value of $1 per share. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Jan. 10

Account titles and explanationDebtCredit
Cash398,400 
Common Stock 66400
Paid-in Capital in Excess of Stated Value-Common Stock 332000

Cash = 66,400 x 6 = 398,400

Common Stock = 66,400 x 1 = 66,400

Paid-in Capital in Excess of Stated Value-Common Stock = 66,400 x 5(6-1) = 332000

Jul. 1

Account titles and explanationDebtCredit
Cash340,000 
Common Stock 42,500
Paid-in Capital in Excess of Stated Value-Common Stock 29,7500

Cash = 42,500 x 8= 340,000

Common Stock = 42,500 x 1 = 42,500

Paid-in Capital in Excess of Stated Value-Common Stock = 42,500 x 7(8-1) = 29,7500

Exercise 13-5

Quay Co. had the following transactions during the current period.

Mar. 2 Issued 5,300 shares of $5 par value common stock to attorneys in payment of a bill for $32,500 for services performed in helping the company to incorporate.

Jun. 12 Issued 55,400 shares of $5 par value common stock for cash of $345,000.

Jul. 11 Issued 1,600 shares of $110 par value preferred stock for cash at $140 per share.

Nov. 28 Purchased 1,700 shares of treasury stock for $79,700.

Journalize the transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Mar. 2.

Account titles and explanationDebtCredit
Organization Expense32,500 
Common Stock 26,500
Paid-in Capital in Excess of Par-Common Stock 6,000

Common Stock = 5,300 x 5 =26,500

Jun. 12

Account titles and explanationDebtCredit
Cash345,000 
Common Stock 277,000
Paid-in Capital in Excess of Par-Common Stock 68,000

Common Stock = 55,400 x 5 = 277,000

Jul. 11

Account titles and explanationDebtCredit
Cash224,000 
Preferred Stock 176,000
Paid-in Capital in Excess of Par-Preferred Stock 48,000

Cash = 1,600 x 140 = 224,000

Preferred Stock = 1,600 x 110 = 176,000

Paid-in Capital in Excess of Par-Preferred Stock = 1,600 x 30(140-110) = 48,000

Nov. 28

Account titles and explanationDebtCredit
Treasury Stock79,700 
Cash 79,700

Exercise 13-8

Rinehart Corporation purchased from its stockholders 5,700 shares of its own previously issued stock for $279,300. It later resold 1,900 shares for $52 per share, then 1,900 more shares for $47 per share, and finally 1,900 shares for $41 per share.

Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

To record purchase from stockholders

Account titles and explanationDebtCredit
Treasury Stock279,300 
Cash 279,300

To record sales of shares at $52 per share

Account titles and explanationDebtCredit
Cash98,800 
Treasury Stock 93,100
Paid-in Capital from Treasury Stock 5,700

Cash = 1,900 x 52 = 98,800

Treasury Stock = 1,900 x 49 = 93,100

To record sales of shares at $47 per share

Account titles and explanationDebtCredit
Cash89,300 
Paid-in Capital from Treasury Stock3,800 
Treasury Stock 93,100

Cash = 1,900 x $47= 89,300

Treasury Stock = 1,900 x 49 = 93,100

To record sales of shares at $41 per share

Account titles and explanationDebtCredit
Retained Earnings13,300 
Paid-in Capital from Treasury Stock1,900 
Cash77,900
Treasury Stock 93,100

Cash = 1,900 x $41=77,900

Paid-in Capital from Treasury Stock = 5,700 – $3,800 = 1,900

Treasury Stock = 1,900 x 49 = 93,100

Problem 13-2A

Fechter Corporation had the following stockholders’ equity accounts on January 1, 2014: Common Stock ($4 par) $405,680, Paid-in Capital in Excess of Par Common Stock $178,180, and Retained Earnings $101,940. In 2014, the company had the following treasury stock transactions.

Mar. 1 Purchased 6,570 shares at $9 per share

June 1 Sold 1,480 shares at $13 per share.

Sept. 1 Sold 1,590 shares at $11 per share.

Dec. 1 Sold 1,240 shares at $6 per share.

Fechter Corporation uses the cost method of accounting for treasury stock. In 2014, the company reported net income of $29,080.

A) Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2014, for net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.

Mar. 1

Account titles and explanationDebtCredit
Treasury Stock59130 
Cash 59130

Treasury Stock = 6,570 x 9 = 59130

June 1

Account titles and explanationDebtCredit
Cash19,240 
Treasury Stock 13,320
Paid-in Capital from Treasury Stock 5920

Cash = 1,480 x 13= 19,240

Treasury Stock = 1,480 x 9 = 13,320

Paid-in Capital from Treasury Stock = 1,480 x 4(13-9) = 5920

Sept. 1

Account titles and explanationDebtCredit
Cash17,490 
Treasury Stock 14,310
Paid-in Capital from Treasury Stock 3,180

Cash = 1,590 x 11 = 17,490

Treasury Stock = 1,590 x 9 = 14,310

Paid-in Capital from Treasury Stock = 1,590 x 2(11-9) = 3,180

Dec. 1

Account titles and explanationDebtCredit
Cash7,440 
Paid-in Capital from Treasury Stock3720 
Treasury Stock 11,160

Cash = 1,240 x 6 = 7,440

Paid-in Capital from Treasury Stock = 1,240 x 3 (9-6) = 3,720

Treasury Stock = 1,240 x 9 = 11,160

Dec. 31

Account titles and explanationDebtCredit
Income Summary29,080 
Retained Earnings 29,080

B) Open accounts for Paid-in Capital from Treasury Stock, Treasury Stock, and Retained Earnings. Post to these accounts using J10 as the posting reference. (Post entries in the order of journal entries presented in the previous part.)

Paid-in Capital from Treasury Stock

DateExplanation RefDebtCreditBalance
June 1J1059205920
Sept. 1J10 31809,100
Dec. 1J103,720 5,380

Treasury Stock

DateExplanation RefDebtCreditBalance
Mar. 1J105913059130
June 1 J101332045,810
Sept. 1J10 1431031,500
Dec. 1J10 1116020,340

Retained Earnings

DateExplanation RefDebtCreditBalance
Jan. 1ü 101,940
Dec. 1 J1029,080131020

C) Prepare the stockholders’ equity section for Fechter Corporation at December 31, 2014. (Enter the account name only and do not provide the descriptive information provided in the question.)

Fechter Corporation Balance sheet (partial) December 31, 2014

Stockholders’ equity
Paid-in Capital  
Capital Stock  
Common Stock405,680
Additional Paid-in Capital
Paid-in Capital in Excess of Par-Common Stock178,180 
Paid-in Capital from Treasury Stock5380 
Total Additional Paid-in Capital183,560
Total Paid-in Capital589,240
Retained Earnings
Total paid in Capital and Retained Earnings 720,260
LessTreasury Stock 20,340
Total Stockholders’ equity = 125,000 -11,000 =  699,920
    
 Stockholders’ equity      
Paid-in capital      
Capital stock       
Common stock, $4 par, 101,420 shares issued and 99,160 outstanding    $405,680 
      Additional paid-in capital       
Paid-in Capital in Excess of Par-Common Stock       $178,180   
Paid-in Capital from Treasury   5,380   
            Total additional paid-in capital           183,560 
Total paid-in capital    589,240 
Retained earnings    131,020 
Total paid-in capital and retained earnings    720,260 
 Less: Treasury stock (2,260 common shares, at cost)    (20,340)
Total stockholders’ equity    $699,920 

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