Entries for Cash Dividends
The declaration, record, and payment dates in connection with a cash dividend of $187,500 on a corporation's common stock are July 10, August 9, and September 18.
Journalize the entries required on each date.
If no entry is required, type "No entry required" and leave the amount boxes blank.
Issuing Stock
Willow Creek Nursery, with an authorization of 75,000 shares of preferred stock and 200,000 shares of common stock, completed several transactions involving its stock on October 1, the first day of operations. The trial balance at the close of the day follows:
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Cash ..........................................................................................
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3,780,000
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Land ...........................................................................................
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840,000
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Buildings .....................................................................................
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2,380,000
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Preferred 1% Stock, $80 par ........................................................
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2,800,000
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Paid-In Capital in Excess of Par-Preferred Stock ............................
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420,000
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Common Stock, $30 par ..............................................................
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3,600,000
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Paid-In Capital in Excess of Par-Common Stock.............................
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180,000
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7,000,000
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7,000,000
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All shares within each class of stock were sold at the same price. The preferred stock was issued in exchange for the land and buildings.
Journalize the entries to record the (1) common and (2) preferred stock transactions summarized in the trial balance.
For a compound transaction, if an amount box does not require an entry, leave it blank.
For a compound transaction, if an amount box does not require an entry, leave it blank.
Entries for Issuing No-Par Stock
On August 5, Synthetic Carpet Inc., a carpet wholesaler, issued for cash 500,000 shares of no-par common stock (with a stated value of $1) at $3, and on December 17, it issued for cash 5,000 shares of preferred stock, $180 parat $200.
a. Journalize the entries for August 5 and December 17, assuming that the common stock is to be credited with the stated value.
For a compound transaction, if an amount box does not require an entry, leave it blank.
b. What is the total amount invested (total paid-in capital) by all stockholders as of December 17?
Pacific Gas and Electric Company is a large gas and electric utility operating in northern and central California. Three recent years of financial data for Pacific Gas and Electric Company are as follows:
Determine the earnings per share for fiscal Year 3, Year 2, and Year 1. Round to two decimal places.
Entries for Stock Dividends
Healthy Living Co. is an HMO for businesses in the Seattle area. The following account balances appear on the balance sheet of Healthy Living Co.: Common stock (400,000 shares authorized; 300,000 shares issued), $18 par, $5,400,000; Paid-in capital in excess of par-common stock, $1,500,000; and Retained earnings, $78,000,000. The board of directors declared a 5% stock dividend when the market price of the stock was $40 a share. Healthy Living Co. reported no income or loss for the current year.
For a compound transaction, if an amount box does not require an entry, leave it blank. If no entry is required, select "No entry required" from the dropdown.
a1. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value.
a2. Journalize the entry to record the issuance of the stock certificates.
b. Determine the following amounts before the stock dividend was declared: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders' equity.
c. Determine the following amounts after the stock dividend was declared and closing entries were recorded at the end of the year: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders' equity.
Entries for Stock Dividends
Healthy Living Co. is an HMO for businesses in the Seattle area. The following account balances appear on the balance sheet of Healthy Living Co.: Common stock (400,000 shares authorized; 300,000 shares issued), $18 par, $5,400,000; Paid-in capital in excess of par-common stock, $1,500,000; and Retained earnings, $78,000,000. The board of directors declared a 5% stock dividend when the market price of the stock was $40 a share. Healthy Living Co. reported no income or loss for the current year.
For a compound transaction, if an amount box does not require an entry, leave it blank. If no entry is required, select "No entry required" from the dropdown.
a1. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value.
a2. Journalize the entry to record the issuance of the stock certificates.
b. Determine the following amounts before the stock dividend was declared: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders' equity.
Total paid-in capital $
Total retained earnings $
Total stockholders' equity $
c. Determine the following amounts after the stock dividend was declared and closing entries were recorded at the end of the year: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders' equity.
Total paid-in capital $
Total retained earnings $
Total stockholders' equity $
Dividends Per Share
Wallace Inc., a developer of radiology equipment, has stock outstanding as follows: 30,000 shares of cumulative preferred 2% stock, $90 par and 125,000 shares of $10 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $24,000; second year, $81,000; third year, $92,000; fourth year, $139,000.
Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0".
Effect of Financing on Earnings per Share
Rhett Co., which produces and sells biking equipment, is financed as follows:
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is (a) $15,000,000, (b) $17,500,000, and (c) $20,000,000.
Enter answers in dollars and cents, rounding to the nearest whole cent.
a. Earnings per share on common stock $
b. Earnings per share on common stock $
c. Earnings per share on common stock $
Entries for Installment Note Transactions
On January 1, 2014, Parker Company obtained a $125,000, four-year, 6% installment note from Clark Bank. The note requires annual payments of $36,074, beginning on December 31, 2014.
Hint(s)
a. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 3. Round the computation of the interest expense to the nearest whole dollar. Enter all amounts as positive numbers. (Note: Due to rounding, the 12/31/2017 Interest expense is provided.)
b. Journalize the entries for the issuance of the note and the four annual note payments. For a compound transaction, if an amount box does not require an entry, leave it blank.
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method
On the first day of its fiscal year, Woodard Company issued $12,000,000 of 10-year, 8% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 10%, resulting in Woodard Company receiving cash of $10,504,541.
a. Journalize the entries to record the following:
For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar.
b. Determine the amount of the bond interest expense for the first year.
Effect of Financing on Earnings Per Share
Three different plans for financing an $18,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income.
Required:
1. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $2,100,000. Enter answers in dollars and cents, rounding to the nearest whole cent.
Earnings Per Share on Common Stock
Plan 1 $
Plan 2 $
Plan 3 $
2. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $1,050,000. Enter answers in dollars and cents, rounding to the nearest whole cent.
Earnings Per Share on Common Stock
Plan 1 $
Plan 2 $
Plan 3 $
3. The principal of Plan 1 is that it involves only the issuance of common stock, which does not require a periodic interest payment or return of principal, and a payment of preferred dividends required.
1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 2014. For a compound transaction, if an amount box does not require an entry, leave it blank.
2. Journalize the entries to record the following: For a compound transaction, if an amount box does not require an entry, leave it blank.
a. The first semiannual interest payment on December 31, 2014, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
b. The interest payment on June 30, 2015, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
3. Determine the total interest expense for 2014. Round to the nearest dollar.
4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?
Bond Premium, Entries for Bonds Payable Transactions
Wishaw, Inc. produces and sells outdoor equipment. On July 1, 2014, Wishaw, Inc. issued $150,000,000 of 20-year, 12% bonds at a market (effective) interest rate of 9%, receiving cash of $191,403,720. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Required:
For all journal entries with a compound transaction, if an amount box does not require an entry, leave it blank.
1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 2014.
2. Journalize the entries to record the following:
a. The first semiannual interest payment on December 31, 2014, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)
b. The interest payment on June 30, 2015, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)
3. Determine the total interest expense for 2014. Round to the nearest dollar.
4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest?