chapter 13 demonstration problems stockholders' equity copyright © 2014 pearson education,...
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Chapter 13
Demonstration Problems
Stockholders' Equity
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Future Express Inc. completed the following stock issuance transactions:
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May 5 Issued 3,000 shares of $1 par value common stock for cash of $8.00 per share.
Jun. 1 Issued 500 shares of $5, no-par preferred stock for $20,000 cash.
Jun. 15 Received equipment with a market value of $90,000 in exchange for 5,000 shares of the $1 par value common stock.
Requirements
1. Journalize the transactions. Explanations are not required.
2. How much paid-in capital did these transactions generate for Future Express?
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May 5: Issued 3,000 shares of $1 par value common stock for cash of $8.00 per share.
E13-19D—Req.1
Date Accounts and Explanation Debit Credit
May 5 Cash ($8.00 per share × 3,000 shares) 24,000
Common Stock ($1 per share × 3,000 shares) 3,000
Paid-In Capital in Excess of Par—Common 21,000
($24,000 − $3,000)
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Jun. 1: Issued 500 shares of $5, no-par preferred stock for $20,000 cash.
E13-19D—Req.1
Date Accounts and Explanation Debit Credit
Jun. 1 Cash 20,000
Preferred Stock 20,000
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Jun. 15: Received equipment with a market value of $90,000 in exchange for 5,000 shares of the $1 par value common stock.
E13-19D—Req.1
Date Accounts and Explanation Debit Credit
Jun. 15 Equipment 90,000
Common Stock—$1 Par Value 5,000
($1 per share × 5,000 shares)
Paid-In Capital in Excess of Par—Common 85,000
($90,000 − $5,000)
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E13-19D—Req.2
Cash for Common Stock ﴾$8 × 3,000 shares﴿ $24,000
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E13-19D—Req.2
Cash for Common Stock ﴾$8 × 3,000 shares﴿ $24,000
Cash for Preferred Stock 20,000
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E13-19D—Req.2
Cash for Common Stock ﴾$8 × 3,000 shares﴿ $24,000
Cash for Preferred Stock 20,000
Equipment for Common Stock 90,000
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E13-19D—Req.2
Cash for Common Stock ﴾$8 × 3,000 shares﴿ $24,000
Cash for Preferred Stock 20,000
Equipment for Common Stock 90,000
Total paid-in capital $134,000
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Boston Stream, Corp. had the following stockholders’ equity at December 31, 2013:
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Stockholders’ EquityPaid-In Capital:Common Stock—$2 Par Value; 1,000 sharesauthorized, 400 shares issued and outstanding $800Paid-In Capital in Excess of Par—Common 1,700Total Paid-In Capital 2,500Retained Earnings 4,000Total Stockholders’ Equity $6,500
On May 31, 2014, Boston Stream split its common stock 2-for-1. Prepare the stockholders’ equity section of the balance sheet immediately after the split. Assume the balance in retained earnings is unchanged from December 31, 2013.
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E13-27D
Stockholders’ EquityPaid-In Capital:Common Stock—$1 Par Value; 1,000 sharesauthorized, 800 shares issued and outstanding $800
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E13-27D
Stockholders’ EquityPaid-In Capital:Common Stock—$1 Par Value; 1,000 sharesauthorized, 800 shares issued and outstanding $800Paid-In Capital in Excess of Par—Common 1,700
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E13-27D
Stockholders’ EquityPaid-In Capital:Common Stock—$1 Par Value; 1,000 sharesauthorized, 800 shares issued and outstanding $800Paid-In Capital in Excess of Par—Common 1,700Total Paid-In Capital 2,500
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E13-27D
Stockholders’ EquityPaid-In Capital:Common Stock—$1 Par Value; 1,000 sharesauthorized, 800 shares issued and outstanding $800Paid-In Capital in Excess of Par—Common 1,700Total Paid-In Capital 2,500Retained Earnings 4,000
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E13-27D
Stockholders’ EquityPaid-In Capital:Common Stock—$1 Par Value; 1,000 sharesauthorized, 800 shares issued and outstanding $800Paid-In Capital in Excess of Par—Common 1,700Total Paid-In Capital 2,500Retained Earnings 4,000Total Stockholders’ Equity $6,500
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Magnum, Corp. earned net income of $130,000 and paid the minimum dividend to preferred stockholders for 2014. Assume that there are no changes in common shares outstanding. Magnum's books include the following figures:
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Requirements
1. Compute Magnum's EPS for the year.
2. Assume Magnum's market price of a share of common stock is $5 per share. Compute Magnum’s price/earnings ratio for the year.
Preferred Stock—4%, $100 Par Value; 1,000 shares authorized, 600 shares issued and outstanding
$60,000
Common Stock—$1 Par Value; 100,000 shares authorized, 80,000 shares issued, 75,000 shares outstanding
80,000
Paid-In Capital in Excess of Par—Common 550,000
Treasury Stock—Common; 5,000 shares at cost ﴾20,000﴿
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E13-33D—Req.1
Earnings per share ═
Net income − Preferred dividends Average number of common shares outstanding
Net income $130,000Preferred dividends ﴾600 shares × $100 × 4%﴿ $2,400Market price per share of common stock $5Average number of common shares outstanding 75,000
.
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E13-33D—Req.1
Earnings per share ═
Net income − Preferred dividends Average number of common shares outstanding
═ $130,000 − $2,40075,000
Net income $130,000Preferred dividends ﴾600 shares × $100 × 4%﴿ $2,400Market price per share of common stock $5Average number of common shares outstanding 75,000
.
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E13-33D—Req.1
Earnings per share ═
Net income − Preferred dividends Average number of common shares outstanding
═ $130,000 − $2,40075,000
═ $127,60075,000
Net income $130,000Preferred dividends ﴾600 shares × $100 × 4%﴿ $2,400Market price per share of common stock $5Average number of common shares outstanding 75,000
.
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E13-33D—Req.1
Earnings per share ═
Net income − Preferred dividends Average number of common shares outstanding
═ $130,000 − $2,40075,000
═ $127,60075,000
═ $1.70 per share
Net income $130,000Preferred dividends ﴾600 shares × $100 × 4%﴿ $2,400Market price per share of common stock $5Average number of common shares outstanding 75,000
.
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E13-33D—Req.1&2
Earnings per share ═
Net income − Preferred dividends Average number of common shares outstanding
═ $130,000 − $2,40075,000
═ $127,60075,000
═ $1.70 per share
Net income $130,000Preferred dividends ﴾600 shares × $100 × 4%﴿ $2,400Market price per share of common stock $5Average number of common shares outstanding 75,000
.
Price/earnings ratio ═
Market price per share of common stockEarnings per share
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E13-33D—Req.1&2
Earnings per share ═
Net income − Preferred dividends Average number of common shares outstanding
═ $130,000 − $2,40075,000
═ $127,60075,000
═ $1.70 per share
Net income $130,000Preferred dividends ﴾600 shares × $100 × 4%﴿ $2,400Market price per share of common stock $5Average number of common shares outstanding 75,000
.
Price/earnings ratio ═
Market price per share of common stockEarnings per share
═ $5$1.70
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E13-33D—Req.1&2
Earnings per share ═
Net income − Preferred dividends Average number of common shares outstanding
═ $130,000 − $2,40075,000
═ $127,60075,000
═ $1.70 per share
Net income $130,000Preferred dividends ﴾600 shares × $100 × 4%﴿ $2,400Market price per share of common stock $5Average number of common shares outstanding 75,000
.
Price/earnings ratio ═
Market price per share of common stockEarnings per share
═ $5 $1.70
═ $2.94 per share
End of Chapter 13
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