Question : 51.The shareholders’ equity section of Manning Company as of December : 1241743

 

 

51.The shareholders’ equity section of Manning Company as of December 31, 2015 follows:

Common stock (11,000 shares issued @ $6 par)

$66,000

Additional paid-in capital (Common stock)

100,000

Retained earnings

60,000

Less: Treasury stock (1,000 share @ $12)

(12,000)

Total shareholders’ equity

$214,000

 

The company declares and distributes a 3 percent stock dividend on the outstanding shares.  The market price of the stock is $85 per share. The journal entry to record the stock dividend would include:

a. a debit to Additional Paid-In Capital, Common Stock for $25,500.

b. a credit to Common Stock for $1,800.

c. a credit to Stock Dividend for $25,500.

d. a debit to Additional Paid-In Capital, Common Stock for $23,700.

 

Solution:

Stock Dividend (–SE)……………………………              25,500*

Common Stock (+SE)…………………………..                            1,800

Additional Paid-In Capital, Common Stock (+SE)………….                            23,700

 

*$25,500=(11,000 shares issued – 1,000 shares in treasury) ?3% ? $85 per share

 

 

 

52.The shareholders’ equity section of Manning Company as of December 31, 2015 follows:

Common stock (11,000 shares issued @ $6 par)

$66,000

Additional paid-in capital (Common stock)

100,000

Retained earnings

60,000

Less: Treasury stock (1,000 share @ $12)

(12,000)

Total shareholders’ equity

$214,000

 

The company declares a 12 percent stock dividend on the outstanding shares.  The market price of the stock is $90. The journal entry to record the stock dividend would include:

a. a credit to Additional Paid-In Capital, Common Stock for $100,800.

b. a debit to Common Stock for $7,200.

c. a credit to Stock Dividend for $108,000.

d. a debit to Additional Paid-In Capital, Common Stock for $108,000.

 

Solution:

Stock Dividend (–SE)……………………………              108,000*

Common Stock (+SE)…………………………..                            7,200

Additional Paid-In Capital, Common Stock (+SE)………….                            100,800

 

*$108,000=(11,000 shares issued – 1,000 shares in treasury) ? 12% ? $90

 

 

 

53.The shareholders’ equity section of Jason Company as of December 31, 2015 follows:

 

Common stock

$180,000

Additional paid-in capital (Common stock)

110,000

Retained earnings

160,000

Total shareholders’ equity

$450,000

 

On January 15, the company repurchased 1,500 shares of its own common stock at $60 to hold as treasury stock.  Which of the following would be included in the journal entry recorded on January 15?

 

a. a credit to Retained Earnings for $90,000.

b. a debit to Cash for $90,000.

c. a debit to Treasury Stock for $90,000.

d. a debit to Common Stock for $90,000.

 

Solution:

 

Treasury Stock (–SE)……………………………              90,000

Cash (–A)………………………………..              90,000

 

 

54.The shareholders’ equity section of Jason Company as of December 31, 2015 follows:

 

Common stock

$180,000

Additional paid-in capital (Common stock)

110,000

Retained earnings

160,000

Total shareholders’ equity

$450,000

 

On January 15, the company repurchased 1,500 shares of its own stock at $60 for treasury stock.  On January 16, as part of a compensation package, the company reissued half of the treasury shares to executives who exercised stock options for $20 per share.  On January 28, the company reissued the remainder of the treasury stock on the open market for $66 per share.  Which of the following would be included in the journal entry recorded on January 16?

 

a. a debit to Cash for $15,000.

b. a debit to Treasury Stock for $45,000.

c. a credit to Additional Paid-In Capital for $45,000.

d. a credit to Additional Paid-In Capital for $15,000.

 

Solution:

 

Cash (+A)……………………………15,000

Additional Paid-In Capital (–SE)…………………….              30,000

Treasury Stock (+SE)…………………………..                            45,000

 

 

 

55.The shareholders’ equity section of the Jason Company as of December 31, 2015 is as follows:

 

Common stock

$180,000

Additional paid-in capital (Common stock)

110,000

Retained earnings

160,000

Total shareholders’ equity

$450,000

 

On January 15, the company repurchased 1,500 shares of its own stock at $60 for treasury stock.  On January 16, as part of a compensation package, the company reissued half of the treasury shares to executives who exercised stock options for $20 per share.  On January 28, the company reissued the remainder of the treasury stock on the open market for $65 per share.  Which of the following would be included in the journal entry recorded on January 28?

 

a. a credit to Treasury Stock for $48,750.

b. a credit to Additional Paid-In Capital, Treasury Stock for $48,750.

c. a debit to Cash for $45,000.

d. a credit to Additional Paid-In Capital, Treasury Stock for $3,750.

 

Solution:

 

Cash (+A)……………………………48,750

Treasury Stock (+SE)…………………………..                            45,000

Additional Paid-In Capital, Treasury Stock (+SE)………….                            3,750

 

 

56.The shareholders’ equity section of Winters Company contained the following balances as of December 31, 2015:

 

Preferred stock (10%, $15 par value, cumulative)

$1,500

Preferred stock (12%, $10 par value , noncumulative)

1,500

Common stock ($1 par value, 5,000 shares authorized, 3,500 issued and 400 held in treasury)

3,500

Additional paid-in capital:

 

Preferred stock (10%)

1,050

Preferred stock (12%)

1,275

Common stock

2,345

Retained earnings

4,256

Less: Treasury stock

(5,750)

Total shareholders’ equity

$9,676

 

During 2016, Winters entered into the following transaction:  On May 13, the company repurchased 55 shares of its common stock in the open market at $25 per share.  Which of the following would be included in the journal entry for May 13?

a. a debit to Cash for $1,375.

b. a credit to Common Stock for $1,375.

c. a debit to Common Stock for $1,375.

d. a debit to Treasury Stock for $1,375.

 

Solution:

 

Treasury Stock (–SE)………………………………..              1,375

Cash (–A)………………………………..1,375

 

 

57.The shareholders’ equity section of Winters Company contained the following balances as of December 31, 2015:

 

Preferred stock (10%, $15 par value, cumulative)

$1,500

Preferred stock (12%, $10 par value , noncumulative)

1,500

Common stock ($1 par value, 5,000 shares authorized, 3,500 issued and 400 held in treasury)

3,500

Additional paid-in capital:

 

Preferred stock (10%)

1,050

Preferred stock (12%)

1,275

Common stock

2,345

Retained earnings

4,256

Less: Treasury stock

(5,750)

Total shareholders’ equity

$9,676

 

During 2016, Winters entered into the following transaction:  On September 26, the company issued 200 shares of its 10 percent preferred stock at $23 per share.  Which of the following would be included in the September 26 journal entry?

 

a. a debit to Preferred Stock for $3,000.

b. a credit to Cash for $4,600.

c. a debit to Cash for $3,000.

d. a credit to Additional Paid-In Capital, 10% Preferred Stock for $1,600.

 

Solution:

 

Cash (+A)…………………………….4,600

Preferred Stock (10%) (+SE)………………………                            3,000

Additional Paid-In Capital, 10% Preferred Stock (+SE)………              1,600

 

 

 

58.The shareholders’ equity section of Winters Company contained the following balances as of December 31, 2015:

 

Preferred stock (10%, $15 par value, cumulative)

$1,500

Preferred stock (12%, $10 par value , noncumulative)

1,500

Common stock ($1 par value, 5,000 shares authorized, 3,500 issued and 400 held in treasury)

3,500

Additional paid-in capital:

 

Preferred stock (10%)

1,050

Preferred stock (12%)

1,275

Common stock

2,345

Retained earnings

4,256

Less: Treasury stock

(5,750)

Total shareholders’ equity

$9,676

 

On September 26, 2016, Winters issued 200 shares of its 10 percent preferred stock at $23 per share.   On December 2, the company declared a cash dividend of $1,050, which was paid on December 27.  Winters did not declareor pay any dividends during 2015.  If Winters uses a separate dividend account for each type of stock, which of the following would be included in the journal entryto record the declaration of the 10% Preferred stock dividend?

 

a.a credit to 10% Preferred Cash Dividend for $600.

b.a debit to Dividend Expense for $600.

c.   a credit to Dividends Payable for $600.

d.   a debit to Cash for $600.

 

Solution:

 

10% Preferred Cash Dividend (–SE)……………………….              600a

Dividends Payable (+L)……………………………….                            600

 

a$600=Dividends in arrears + current dividend

=($1,500 ? 10%) + ($4,500 ? 10%)

 

 

59.The shareholders’ equity section of Winters Company contained the following balances as of December 31, 2015:

 

Preferred stock (10%, $15 par value, cumulative)

$1,500

Preferred stock (12%, $10 par value , noncumulative)

1,500

Common stock ($1 par value, 5,000 shares authorized, 3,500 issued and 400 held in treasury)

3,500

Additional paid-in capital:

 

Preferred stock (10%)

1,050

Preferred stock (12%)

1,275

Common stock

2,345

Retained earnings

4,256

Less: Treasury stock

(5,750)

Total shareholders’ equity

$9,676

 

During 2016, Winters entered into the following transaction:  On December 2, the company declared a cash dividend of $1,050, which was paid on December 27.  Winters did not declare or pay any dividends during 2015.    If Winters uses a separate dividend account for each type of stock, which of the following would be included in the journal entry to record the declaration of the 12% Preferred stock dividend?

 

a.a debit to 12% Preferred Cash Dividend for $180.

b.   a debit to Dividend Expense for $180.

c.   a debit to Dividends Payable for $180.

d.   a debit to Cash for $180.

 

Solution:

12% Preferred Cash Dividend (–SE)……………………….              180a

Dividends Payable (+L)……………………………….                            180

 

a$180=Par value ? 12%

=$1,500 ? 12%

 

 

60.The shareholders’ equity section of Winters Company contained the following balances as of December 31, 2015:

 

Preferred stock (10%, $15 par value, cumulative)

$1,500

Preferred stock (12%, $10 par value , noncumulative)

1,500

Common stock ($1 par value, 5,000 shares authorized, 3,500 issued and 400 held in treasury)

3,500

Additional paid-in capital:

 

Preferred stock (10%)

1,050

Preferred stock (12%)

1,275

Common stock

2,345

Retained earnings

4,256

Less: Treasury stock

(5,750)

Total shareholders’ equity

$9,676

 

During 2016, Winters entered into the following transaction: On December 2, the company declared a cash dividend of $1,050, which was paid on December 27.  Winters did not declare or pay any dividends during 2015.  Based on this information, what amount of dividends should be declared and paid to shareholders’ with common stock?

 

a. $350

b. $420

c. $570

d. $385

 

Solution:

 

$1,050 – 300 – 180 = $570

 

 

 

61.The shareholders’ equity section of Samuels Company were reported on the balance

sheets for December 31:

 

 

2015

2014

Preferred stock (9%, $50 par value)

$200,000

$120,000

Common stock ($10 par value, 750,000 shares authorized, 90,000 issued and 5,000 held in treasury)

540,000

396,000

Additional paid-in capital:

 

 

Preferred stock

155,000

55,000

Common stock

336,000

300,000

Retained earnings

575,000

495,000

Less: Treasury stock

(110,000)

——–

Total shareholders’ equity

$1,696,000

$1,366,000

 

Based on this information, how many shares of preferred stock were issued in 2015 and what was the average issue price?

 

a. 4,000 shares and $112.50 per share

b. 160 shares and $88.75 per share

c.  800 shares and $250 per share

d.  1,600 shares and $112.50 per share

 

Solution:

 

Number of Shares Issued=Increase in Par Value ÷ Par Value per Share

=($200,000 – $120,000) ÷ $50 per Share

=1,600 Shares

 

Average Issue Price=Increase in Contributed Capital ÷ Number of Shares

=(Increase in Par Value + Increase in Additional Paid-in Capital) ÷                             1,600 Shares

=[($200,000 – $120,000) + ($155,000 – $55,000)] ÷ 1,600                                                         Shares

=$112.50 per Share

 

 

62.The shareholders’ equity section of Samuels Company were reported on the balance sheets for December 31:

 

 

2015

2014

Preferred stock (9%, $50 par value)

$200,000

$120,000

Common stock ($6 par value, 750,000 shares authorized, 90,000 issued and 5,000 held in treasury)

540,000

396,000

Additional paid-in capital:

 

 

Preferred stock

155,000

55,000

Common stock

336,000

300,000

Retained earnings

575,000

495,000

Less: Treasury stock

(110,000)

——–

Total shareholders’ equity

$2,180,000

$1,688,000

 

Based on this information, how many shares of common stock were issued in 2015 and what was the average issue price?

 

 

a. 21,000 shares and $7.82 per share

b. 30,000 share and $6.00 per share

c. 85,000 shares and $9.73 per share

d. 24,000 shares and $7.50 per share

 

Solution:

 

Number of Shares Issued=($540,000 – $396,000) ÷ $6 per Share

=24,000 Shares

 

Average Issue Price=[($540,000 – $396,000) + ($336,000 – $300,000)] ÷                                                         24,000 Shares

=$7.50 per Share