EXERCISE 11-2

 

June   12      Cash..................................................................         275,000

                              Common Stock (60,000 X $1).............................                               60,000

                              Paid-in Capital in Excess of Par

                                 Value-Common Stock......................................                            215,000

 

July     11      Cash (1,000 X $110).......................................         110,000

                              Preferred Stock (1,000 X $100)..........................                            100,000

                              Paid-in Capital in Excess of Par

                                 Value-Preferred Stock.....................................                               10,000

                                 (1,000 X $10)

 

Nov.    28      Treasury Stock.................................................            80,000

                              Cash.........................................................................                               80,000

EXERCISE 11-3

 

(a)   Feb. 1    Cash (30,000 X $51)....................................      1,530,000

                              Preferred Stock.....................................................                         1,500,000

                                 (30,000 X $50)

                              Paid-in Capital in Excess of

                                 Par Value-Preferred Stock..............................                               30,000

                                 (30,000 X $1)

 

        July 1    Cash (20,000 X $55)....................................      1,100,000

                              Preferred Stock.....................................................                         1,000,000

                                 (20,000 X $50)

                              Paid-in Capital in Excess of

                                 Par Value-Preferred Stock..............................                            100,000

                                 (20,000 X $5)

 

(b)

 

Preferred Stock

 

Paid-in Capital in Excess of

Par Value-Preferred Stock

 

2/1    1,500,000

 

 

2/1             30,000

 

7/1    1,000,000

 

 

7/1           100,000

 

          2,500,000

 

 

                130,000

 

 

 

 

 

 

(c)   Preferred stock-listed first in paid-in capital under capital stock. Paid in Capital in Excess of Par Value-Preferred Stock-listed first under additional paid-in capital.

 

 

EXERCISE 11-4

 

(a)   Common stock outstanding is 590,000 shares. (Issued shares 600,000 less treasury shares 10,000.)

 

(b)   The stated value of the common stock is $3 per share. (Common stock issued $1,800,000 ¸ 600,000 shares.)

 

(c)   The par value of the preferred stock is $150 per share. (Preferred stock $900,000 ¸ 6,000 shares.)

 

(d)   The dividend rate is 5% ($45,000 ¸ $900,000).

 

EXERCISE 11-4 (Continued)

 

(e)   The Retained Earnings balance is still $1,158,000. Cumulative dividends in arrears are only disclosed in the notes to the financial statements.

 

 

EXERCISE 11-5

 

May           2     Cash (10,000 X $12)....................................         120,000

                          Common Stock (10,000 X $5).................................                               50,000

                          Paid-in Capital in Excess of Par

                             Value-Common Stock..........................................                               70,000

                             (10,000 X $7)

 

         10      Cash......................................................................         600,000

                          Preferred Stock (10,000 X $50)..............................                            500,000

                          Paid-in Capital in Excess of Par

                             Value-Common Stock..........................................                            100,000

                             (10,000 X $10)

 

         15      Treasury Stock.....................................................            12,000

                          Cash............................................................................                                             12,000

 

 

EXERCISE 11-6

 

(a)   June 15    Retained Earnings......................................         120,000

                             (80,000 X $1.50)

                                  Dividends Payable............................................                            120,000

 

        July   10    Dividends Payable.....................................         120,000

                                  Cash.....................................................................                            120,000

 

        Dec.  15    Retained Earnings......................................         149,400

                             (83,000 X $1.80)

                                  Dividends Payable............................................                            149,400

 

(b)   In the retained earnings statement, dividends of $269,400 will be deducted. In the balance sheet, Dividends Payable of $149,400 will be reported as a current liability.

EXERCISE 11-7

 

(a)   Retained Earnings (20,000* X $12).............................         240,000

               Common Stock Dividends Distributable.........................                            200,000

                  (20,000 X $10)

               Paid-in Capital in Excess of Par Value............................                               40,000

                  (20,000 X $2)

 

        *[($1,500,000 ¸ $10) + 50,000] X 10%

 

(b)   Retained Earnings (35,000* X $18).............................         630,000

               Common Stock Dividends Distributable.........................                            175,000

                  (35,000 X $5)

               Paid-in Capital in Excess of Par Value............................                            455,000

                  (35,000 X $13)

 

        *[($1,500,000 ¸ 5) + 50,000] X 10%

 

 

EXERCISE 11-8

 

                                                                                                     After           After

                                                                             Before           Stock         Stock

                                                                              Action        Dividend       Split  

Stockholders’ equity

        Paid-in capital

               Common stock                             $  800,000  $  840,000  $  800,000

               In excess of par value                                 0         20,000                   0

                       Total paid-in capital                  800,000       860,000       800,000

        Retained earnings                                   400,000       340,000       400,000

                       Total stockholders’

                          equity                                  $1,200,000 $1,200,000 $1,200,000

 

Outstanding shares                                          80,000         84,000       160,000

 

Book value per share                                       $15.00         $14.29           $7.50

 

 

EXERCISE 11-9

 

1.    Dec.  31    Retained Earnings......................................          15,000

                                  Interest Expense.............................................                               15,000

 

2.               31    Retained Earnings........................................            7,000

                          Dividends Payable......................................          10,000

                                  Common Stock Dividends

                                     Distributable..................................................                               10,000

                                  Paid-in Capital in Excess

                                     of Par Value...................................................                                 7,000

 

3.               31    Common Stock......................................    2,000,000

                                  Retained Earnings...........................................                         2,000,000

 

 

EXERCISE 11-10

 

                                                          Paid-in Capital     

                                                   Capital                                 Retained

               Account                     Stock        Additional      Earnings       Other 

Common Stock                           X

Preferred Stock                          X

Treasury Stock-Common                                                                            X

Paid-in Capital in Excess

   of Par-Preferred Stock                                 X

Paid-in Capital in Excess

   of Stated Value-

   Common Stock                                               X

Retained Earnings                                                                     X

 

EXERCISE 11-11

 

HELEN HUNT INC.

 

Stockholders’ equity

        Paid-in capital

               Capital stock

                       Preferred stock, $5 par value, 8%

                          40,000 shares authorized,

                          30,000 shares issued..............................................                        $  150,000

                       Common stock, no par, $1 stated

                          value, 400,000 shares authorized,

                          200,000 shares issued and 190,000

                          outstanding............................................   $  200,000

                       Common stock dividends

                          distributable............................................          75,000       275,000

                              Total capital stock...............................................                            425,000

               Additional paid-in capital

                       In excess of par value-

                          preferred stock..........................................        344,000

                       In excess of stated value-

                          common stock.......................................   1,200,000

                              Total additional paid-in capital.........................                         1,544,000

                              Total paid-in capital............................................                         1,969,000

        Retained earnings (See Note R)..............................................                            900,000

                              Total paid-in capital and

                                 retained earnings.............................................                         2,869,000

        Less:   Treasury stock (10,000 common

                        shares)                                                                                                        50,000

                              Total stockholders’ equity................................                       $2,819,000

 

Note R: Retained earnings restricted for plant expansion, $100,000.

 

EXERCISE 11-12

                                                               1998                                    1997              

 


Dividend yield

 

 


Payout ratio

 

 


Earnings per share

 

 


Price-earnings ratio

 

 


Return on common

stockholders' equity

 

Eskimo Pie Corporation’s 1997 dividend exceeded its net income, and in 1998 its dividend was 87% of its net income.  This would be difficult to sustain.  Its return on common stockholders’ equity is very low, however, its high P/E ratio suggests that investors believe the company will rebound.

SOLUTIONS TO PROBLEMS

PROBLEM 11-1A
 
 

 

 

 


(a)   Jan. 10      Cash (100,000 X $4)....................................         400,000

                                  Common Stock (100,000 X $1).......................                            100,000

                                  Paid-in Capital in Excess of

                                     Stated Value-Common

                                     Stock (100,000 X $3)......................................                            300,000

 

        Mar.   1      Cash (10,000 X $51)....................................         510,000

                                  Preferred Stock (10,000 X $50).......................                            500,000

                                  Paid-in Capital in Excess of

                                     Par Value-Preferred Stock..........................                               10,000

                                     (10,000 X $1)

 

        May   1      Cash (150,000 X $4)....................................         600,000

                                  Common Stock (150,000 X $1).......................                            150,000

                                  Paid-in Capital in Excess of

                                     Stated Value-Common

                                     Stock (150,000 X $3)......................................                            450,000

 

        Sept.  1      Cash (5,000 X $6)..........................................            30,000

                                  Common Stock (5,000 X $1)............................                                 5,000

                                  Paid-in Capital in Excess of

                                     Stated Value-Common

                                     Stock (5,000 X $5)...........................................                               25,000

 

        Nov.   1      Cash (2,000 X $63)......................................         126,000

                                  Preferred Stock (2,000 X $50).........................                            100,000

                                  Paid-in Capital in Excess of

                                     Par Value-Preferred Stock..........................                               26,000

                                     (2,000 X $13)

 

(b)

 

Preferred Stock

 

Paid-in Capital in Excess of

Par Value-Preferred Stock

 

3/1           500,000

 

 

3/1               10,000

 

11/1         100,000

 

 

11/1             26,000

 

12/31 Bal.                  600,000

 

 

12/31 Bal.   36,000

 

PROBLEM 11-1A (Continued)

 

 

Common Stock

 

Paid-in Capital in Excess of

Stated Value-Common Stock

 

1/10         100,000

 

 

1/10           300,000

 

5/1           150,000

 

 

5/1             450,000

 

9/1                5,000

 

 

9/1               25,000

 

12/31 Bal.                 255,000