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Accounting chapter 11 solution, Exercises of Accounting

Bahria University (BU)Accounting

Accounting chapter 11solution

Typology: Exercises

2019/2020

Uploaded on 03/07/2020

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CHAPTER 11

STOCKHOLDERS’ EQUITY:

PAID-IN CAPITAL

OVERVIEW OF EXERCISES, PROBLEMS, CASES,

AND INTERNET ASSIGNMENT

Exercises Topic

Learning

Objectives

Character of

Assignment

11–1 Form of organization 1, 2, 3 Personal, conceptual

11–2 Accounting terminology 1–9 Conceptual

11–3 Prepare equity section 4, 5 Mechanical, conceptual

11–4 Dividends on preferred &

common

4, 5 Mechanical, conceptual

11–5 Analyzing equity 4, 5, 6, 7 Conceptual, analytical

11–6 Issuing stock for noncash assets 2, 4 Conceptual

11–7 Reporting effects of transactions 4, 7 Conceptual

11–8 Computing book value 4, 5, 6, 7 Mechanical, conceptual

11–9 Treasury stock transactions 9 Mechanical, conceptual

11–10 Effects of stock splits 8 Conceptual

11–11 Treasury stock presentation 9 Conceptual, ethical, group,

communication

11–12 Reading an annual report 4, 7 Research, real—Tootsie Roll

Problems

11–1 Reporting stockholders’ equity 4, 5, 6 Conceptual, mechanical

11–2 Reporting stockholders’ equity 4, 5, 6 Conceptual, mechanical

11–3 Reporting stockholders’ equity 4, 5, 6 Conceptual, mechanical

11–4 Comprehensive equity problem 4, 5 Conceptual, mechanical

11–5 Analysis of equity 4, 5 Conceptual, mechanical

11–6 Comprehensive equity analysis 1–7 Analytical, communication, group,

real—Quanex Corporation

11–7 Par, book, and market values 4, 7 Conceptual, group, communication

11–8 Comprehensive equity with

treasury stock transactions

4, 5, 7, 9 Conceptual, mechanical

11–9 Comprehensive equity with

treasury stock transactions and

stock splits

4, 5, 7, 8, 9 Analytical, conceptual, mechanical

Discover Exercises of Accounting Bahria University (BU)

Partial preview of the text

Download Accounting chapter 11 solution and more Exercises Accounting in PDF only on Docsity!

CHAPTER 11 STOCKHOLDERS’ EQUITY:

PAID-IN CAPITAL

OVERVIEW OF EXERCISES, PROBLEMS, CASES,

AND INTERNET ASSIGNMENT

Exercises Topic

Learning

Objectives

Character of

Assignment

11–1 Form of organization 1, 2, 3 Personal, conceptual

11–2 Accounting terminology 1–9 Conceptual

11–3 Prepare equity section 4, 5 Mechanical, conceptual

11–4 Dividends on preferred &

common

4, 5 Mechanical, conceptual

11–5 Analyzing equity 4, 5, 6, 7 Conceptual, analytical

11–6 Issuing stock for noncash assets 2, 4 Conceptual

11–7 Reporting effects of transactions 4, 7 Conceptual

11–8 Computing book value 4, 5, 6, 7 Mechanical, conceptual

11–9 Treasury stock transactions 9 Mechanical, conceptual

11–10 Effects of stock splits 8 Conceptual

11–11 Treasury stock presentation 9 Conceptual, ethical, group,

communication

11–12 Reading an annual report 4, 7 Research, real— Tootsie Roll

Problems

11–1 Reporting stockholders’ equity 4, 5, 6 Conceptual, mechanical

11–2 Reporting stockholders’ equity 4, 5, 6 Conceptual, mechanical

11–3 Reporting stockholders’ equity 4, 5, 6 Conceptual, mechanical

11–4 Comprehensive equity problem 4, 5 Conceptual, mechanical

11–5 Analysis of equity 4, 5 Conceptual, mechanical

11–6 Comprehensive equity analysis 1–7 Analytical, communication, group,

real— Quanex Corporation

11–7 Par, book, and market values 4, 7 Conceptual, group, communication

11–8 Comprehensive equity with

treasury stock transactions

4, 5, 7, 9 Conceptual, mechanical

11–9 Comprehensive equity with

treasury stock transactions and

stock splits

4, 5, 7, 8, 9 Analytical, conceptual, mechanical

Cases Topic

Learning

Objectives

Character of

Assignment

11–1 Factors affecting market prices

of preferred and common

stocks

5, 7 Analytical, communication

11–2 Factors affecting market prices

of preferred and common

stocks

7 Analytical, communication, group,

real— McDonnell Douglas, Citicorp,

and Ventitex

11–3 Selecting a form of business

organization

1, 2, 3 Analytical, communication, research,

group

Business Week

Assignment

11–4 Business Week assignment 5 Conceptual, communication, group

assignment

Internet

Assignment

11–1 Stockholders’ equity items 4, 5, 7, 9 Internet research, real— Staples, Inc.

11–9 Parker Industries

A comprehensive equity problem involving treasury stock transactions in two

different years, preferred and common stock transactions, book value

calculations, and an understanding of stock splits.

30 Strong

Cases

11–1 Forecasting Changes in Stock Prices

Students are asked to explain whether the prices of preferred stock, common

stock, and convertible preferred stock are likely to rise or fall if profitability

increases dramatically and interest rates rise slightly. A problem that

stimulates lively classroom discussion.

15 Medium

11–2 Why Did the Price Change?

Students are to explain the reason for changes in the market prices of stocks of

various real companies. A difficult problem that is very thought-provoking.

25 Strong

11–3 Selecting a Form of Organization (group assignment)

Students are to interview the owners of two small businesses with different

forms of organization and find out why the particular form was selected—and

if they have any misgivings.

Interview; No

time estimate

Business Week Assignment

11–4 Business Week Assignment

Students are asked to compare and contrast similarities and differences

between preferred stocks and fixed income investments, such as bonds.

10 Easy

Internet Assignment

11–1 Examining Stockholders’ Equity

Students are asked to identify and discuss elements of stockholders’ equity

appearing in the balance sheet of Staples, Inc.

10 Easy

suggested answers to discussion questions

1. Large corporations are often said to be publicly owned because they are literally owned by the general

public. The capital stock of many large corporations is actively traded on organized stock exchanges,

such as the New York Stock Exchange. Anyone may purchase an ownership interest in such

corporations, even if that interest is but a single share of capital stock. Many large corporations have

hundred of thousands, even millions, of individual stockholders.

2. a. Owners’ liability. Sole proprietors are personally liable for the debts of the business. A

corporation, however, is responsible for its own debts; the stockholders of a corporation are not

personally liable for the debts of the business entity. Thus, the amount of money that a stockholder

might lose by investing in a corporation is limited to the amount of his or her investment.

b. Transferability of ownership interest. A sole proprietor generally must sell his or her entire

interest in the business. This creates a new business owned by a new sole proprietor. Shares of

stock in a corporation are freely transferable.

c. Continuity of existence. A sole proprietorship is terminated upon sale or abandonment by the

owner and upon that person’s death or incapacitation. Corporations continue in existence

regardless of changes in ownership.

d. Federal taxation on income. A corporation is subject to federal income tax on its income, and

stockholders are also subject to a personal income tax on any amounts they receive as dividends. A

sole proprietorship is not a taxable entity, but the owner must pay personal taxes on the income

earned by the business, whether or not it is actually withdrawn by the owner.

3. There are three basic rights: (1) the right to vote, (2) the right to share in dividends when declared, and

(3) the right to share in assets upon liquidation.

A share of preferred stock is typically entitled to cumulative preference to a limited amount of

dividends and to a prior claim against assets in case of liquidation; in return, it usually has no voting

power.

4. The term double taxation refers to the fact that the income of a corporation may be taxed on two

separate occasions. First, the income of a corporation is subject to corporate income taxes, which much

be paid by the corporation. Second, if the corporation distributes its earnings as dividends to

stockholders, the stockholders must pay personal income taxes on the amounts they receive. This

double taxation of income is one of the principal disadvantages of the corporate form of business

organization.

5. Paid-in capital of a corporation represents the amount invested by stockholders and is generally not

available for dividends. Retained earnings represents the cumulative amount of net income not

distributed to shareholders as dividends. The distinction between paid-in capital and retained earnings

is useful because it shows how much of the total stockholders’ equity represents investments by the

owners and how much has been accumulated through profitable operations since the company started

in business.

6. Par value represents the legal capital per share, that is, the amount below which stockholders’ equity

cannot be reduced except by losses. Thus, a corporation cannot declare a dividend if this action would

reduce total stockholders’ equity below the par value of the outstanding stock.

Par value is no indication of a fair or reasonable market price for a share of stock. The market price of

stock is determined by such factors as the profitability and solvency of the issuing company, interest

rates, the amount of dividends paid by the stock, and general market conditions. The market price of a

share of stock may be above or below its par value.

14. To compute book value per share of common stock for a company with both preferred stock and

common stock outstanding, the starting point is total stockholders’ equity, including both preferred

and common stock and all other elements of capital. Deduct from this total the preferred stock at its

call price and any dividends in arrears. The remainder is the equity of the common stockholders.

Divide this amount by the number of shares of common stock outstanding to arrive at book value (or

net assets) per share of common stock.

15. a. When a corporation obtains a bank loan there will be no effect upon book value per share of

common stock. Assets and liabilities will both increase by the amount of the loan. Net assets,

therefore, will be unchanged.

b. Declaration of a dividend reduces book value per share. Total assets are not affected by the

declaration of a dividend, but liabilities are increased. Net assets (stockholders’ equity), therefore,

is decreased.

16. A change in the market price of IBM’s outstanding shares of capital stock has no effect upon IBM’s

balance sheet. These shares belong to IBM’s stockholders, not to IBM. Therefore, a change in the

market value of these shares has no effect upon IBM’s assets, liabilities, or the recorded amount of its

stockholders’ equity. IBM’s paid-in capital accounts will continue to show the amount received by

IBM at the time the capital stock was issued. This historical amount is not affected by subsequent

changes in market price.

17. When you ask a stockbroker to purchase shares of stock for you, the stock is purchased on a secondary

market —in this case the New York Stock Exchange, because that is where Exxon stock is traded. On a

secondary market, you are purchasing the stock from another investor. The transaction will have no

effect on the financial statements of Exxon.

18. The purpose of a stock split is to bring the per-share market price of the company’s stock down into a

more appropriate “trading range”—that is, a price that is appealing to a greater number of potential

investors.

19. Treasury stock is corporate stock that has been issued and then reacquired by the issuing company.

One reason for acquiring treasury stock is to have stock available to issue to officers and employees

under profit-sharing agreements, stock options, or bonus plans. Purchases of treasury stock may also

be intended to support the market price of the stock or to increase earnings per share.

Treasury stock is not an asset; it represents a reduction in the amount of stockholders’ investment in

the corporation. For this reason the cost of the treasury shares is reported in the balance sheet as a

reduction of the stockholders’ equity.

20. The purpose of this rule is to protect corporate creditors, for whom stockholders’ equity represents the

margin of safety against loss from a shrinkage of asset values. The restriction of retained earnings for

dividend purposes to the extent of the cost of treasury shares assures creditors that the stockholders’

equity of a corporation will not, as a result of the purchase of treasury shares, be reduced below the

amount of paid-in capital. If this restriction were not imposed, a corporation might distribute assets

equal to the entire amount of its retained earnings as dividends, and then distribute additional assets in

payment for shares of its own stock, thereby reducing the net assets of the corporation below the

amount of the paid-in capital or even below the amount of stated (legal) capital.

SOLUTIONS TO EXERCISES

Ex. 11–1 a. (1) Organizing the scuba diving school as a sole proprietorship.

Advantages:

(a) Easy to form

(b) No double taxation on distributed earnings

Disadvantages:

(a) Personal liability of owner for debts of the business

(b) Business ceases with death of owner

(2) Organizing the scuba diving school as a corporation.

Advantages:

(a) No personal liability of owners for debts of the business

(b) Readily transferable ownership shares

(c) Continuous existence

Disadvantages:

(a) Double taxation on distributed earnings

(b) Greater regulation

b. A corporation would probably be the better form of organization because of the

characteristic of limited liability of the owners. Potentially, a scuba diving student

could be seriously injured in the class. With the sole proprietorship form of

organization, your personal assets would be at risk to pay for the person’s injuries,

after you exhausted any insurance coverage and assets that the business might have.

Ex. 11–2 a. Double taxation

b. Market value

c. None (Retained earnings is not an amount of cash; it is an element of owners’ equity.)

d. Common stock

e. None (Dividends in arrears are prior years’ dividends owed to holders of cumulative

preferred stock.)

f. None (This statement might be described as the “majority interest.” It does not

describe the board of directors, who do not necessarily own any stock at all.)

g. Publicly held

h. Paid-in capital

i. Retained earnings

j. None (Book value is common stockholders’ equity divided by the number of common

shares outstanding.)

k. None (The price of preferred stock varies inversely with interest rates.)

Ex. 11–5 a. 150,000 shares ($15,000,000 total par value, divided by $100 par value per share)

b. $1,050,000 ($15,000,000 total par value  7% or 150,000  $100  7%)

c. $16 [($20 million par value + $44 million additional paid-in capital)  4,000,

shares issued]

d. $35,000,000 legal capital ($15,000,000 preferred, plus $20,000,000 common)

$79,300,000 total paid-in capital ($35,000,000 legal capital, plus $44,300,

additional paid-in capital)

e. Total stockholders’ equity........................................................................... $143,750,

Less: Call price of preferred stock (150,000 shares  $105)..................... 15,750,

Equity of common stockholders.................................................................. $128,000,

Common shares outstanding....................................................................... 4,000,

Book value per share ($128 million  4 million shares)........................... $

f. No. Changes in the market value of capital stock do not directly affect a corporation’s

financial position and are not reflected in the equity section of the balance sheet.

Ex. 11–6 a. (1) Land........................................................................................... 450,

Common Stock.............................................................. 40,

Additional Paid-in Capital........................................... 410,

Issued 20,000 shares of $2 par value common stock in

exchange for land with a fair market value of $450,000.

(2) Land........................................................................................... 430,

Common Stock.............................................................. 40,

Additional Paid-in Capital........................................... 390,

Issued 20,000 shares of $2 par value common stock with a

market value of $430,000 in exchange for land.

b. When stock is issued in exchange for assets other than cash, the amounts used in

recording the transaction should be based upon the current market value of either (1)

the shares issued, or (2) assets received in exchange—whichever can be determined

more objectively.

For a closely held corporation, there often is no objective evidence of the current value

of the stock. Therefore, there is no alternative but to rely upon the appraised value of

the assets received ($450,000).

But if Hudson is a publicly owned corporation, the value of the shares issued—

$430,000—can be determined with considerable objectivity. Also, as the seller accepts

these shares in exchange for the land, it is logical to conclude that the fair market

value of the land is not greater than this amount.

Ex. 11–

Event

Current

Assets

Stockholders’

Equity

Net

Income

Net Cash Flow

(from Any

Source)

a I I NE I

b NE I NE NE

c NE NE NE NE

d D D NE D

e NE I NE NE

Ex. 11–8 a. Net assets (stockholders’ equity):

8% cumulative preferred stock.......................................................................... $

Common stock, $5 par, 60,000 shares issued.................................................... 300,

Additional paid-in capital.................................................................................. 452,

Total paid-in capital....................................................................................... $

Less: Deficit......................................................................................................... 146,

Total net assets (stockholders’ equity).............................................................. $

b. Book value per share of common stock:

Total stockholders’ equity (from part a )........................................................... $

Less: Claims of preferred stockholders (call price of

$220,000 plus dividends in arrears, $16,000)......................................... 236,

Equity of common stockholders........................................................................ $

Number of shares of common stock outstanding............................................. 60,

Book value per share ($570,000  60,000 shares)............................................ $9.

c. No. The book value per share represents the stockholders’ share of the net book value

of the corporation’s assets, not the assets’ liquidation values. The stockholders may

receive more or less than the book value per share if the corporation is liquidated,

depending primarily on the amounts at which the corporation’s assets are sold.

Ex. 11–11 a. Companies sometimes purchase shares of their own common stock to help boost the

market price per share. This practice is not generally considered unethical, given that

information pertaining to the purchase is fully disclosed in the company’s financial

statements. Furthermore, if the company acquires a significantly large amount of its

outstanding stock, the event would be reported in the financial press.

b. It is inappropriate for a company to classify its treasury stock as a short-term

investment. When treasury stock is purchased, the corporation is actually reducing its

assets (cash), and eliminating part of its stockholders’ equity. For this reason, treasury

stock should not appear in the balance sheet as a current asset.

Ex. 11–12 a. $.69 4/9 (Same for Class B common stock)

b. 120,000 shares for common stock; 40,000 shares for Class B common stock.

Authorized shares are the number of shares specified in the company’s articles of

incorporation. It represents the maximum number of shares that the company is

authorized to issue by its state of incorporation.

c. $430,646,000. This amount is not how much the outstanding stock is actually worth.

The total stockholders’ equity figure represents the amount invested in the company

by owners over time, plus the amount of earnings retained in the company. The

amount reported is an historical concept that may or may not bear a close relationship

to market value.

SOLUTIONS TO PROBLEMS

20 Minutes, Easy PROBLEM 11–

SINCLAIR PRESS

a. SINCLAIR PRESS Partial Balance Sheet December 31, 2002 Stockholders’ equity 8% cumulative preferred stock, $100 par value, callable at $105, authorized 100,000 shares, issued 10,000 shares $ 1 0 0 0 0 0 0 Common stock, $1 par value, authorized 500,000 shares, issued 170,000 shares 1 7 0 0 0 0 Additional paid-in capital: Common stock 2 3 8 0 0 0 0 Total paid-in capital $ 3 5 5 0 0 0 0 Retained earnings* 1 9 5 0 0 0 Total stockholders’ equity $ 3 7 4 5 0 0 0 *Computation of retained earnings at December 31, 2002: Net income for the four-year period, 1999–2002 $ 1 0 2 5 0 0 0 Less: Preferred dividends ($80,000 per year for four years) $ 3 2 0 0 0 0

Common dividends ($0.75 x 170,000 shares x4 years) 5 1 0 0 0 0 8 3 0 0 0 0

Retained earnings, December 31, 2002 $ 1 9 5 0 0 0

b. There are no dividends in arrears at December 31, 2002. We know this because common

dividends were paid in each of the four years that the company was in existence. Common

shareholders could not have received dividends in each year of the company’s existence had any

dividends been in arrears on the preferred stock.

c. The market price of preferred stock usually decreases as interest rates increase. Thus, at

December 31, 2002, the market price of Sinclair’s preferred stock was probably lower than its call

price of $105 (in fact, it may actually have fallen below its original issue price of $100 per share).

25 Minutes, Medium PROBLEM 11–

MANHATTAN TRANSPORT COMPANY

a. MANHATTAN TRANSPORT COMPANY Partial Balance Sheet December 31, 2002 Stockholders’ equity: 8% cumulative preferred stock, $100 par, 5,000 shares authorized and issued $ 5 0 0 0 0 0 $9 cumulative preferred stock, no-par value, 10,000 shares authorized, 5,000 shares issued 5 1 2 0 0 0 Common stock, $2 par, 200,000 shares authorized, 100,000 shares issued 2 0 0 0 0 0 Additional paid-in capital: Common stock 6 0 0 0 0 0 Total paid-in capital $ 1 8 1 2 0 0 0 Retained earnings* 6 4 0 0 0 0 Total stockholders’ equity $ 2 4 5 2 0 0 0 *Computation of retained earnings at Dec. 31, 2002: Retained earnings at Dec. 31, 2000 $ 1 7 0 0 0 0 Add: Net income for 2001 and 2002 8 9 0 0 0 0 Net income for four-year period $ 1 0 6 0 0 0 0 Less: Dividends on 8% preferred stock: 2000 ($40,000 in arrears) $ 0 2001 ($40,000 per year for 2 years) 8 0 0 0 0

2002 (8% x $100 x 5,000 shares ^ $40,000) 4 0 0 0 0 (^1 2 0 0 0 0 )

Dividends on $9 preferred stock: 2001 ($9 x 5,000 shares) $^4 5 0 0 2002 ($9 x 5,000 shares) 4 5 0 0 0 ( 9 0 0 0 0 ) Dividends on common stock: 2001 ($0.50 x 100,000 shares) $ 5 0 0 0 0 2002 ($1.60 x 100,000 shares) 1 6 0 0 0 0 (^2 1 0 0 0 0 ) Retained earnings at Dec. 31, 2002 $ 6 4 0 0 0 0

b. A corporation might decide to use cumulative preferred stock rather than debt to finance

operations for any of the following reasons (only 2 required):

1. Although cumulative dividends must eventually be paid if the corporation is profitable, they

do not have to be paid each year and do not become a legal obligation of the corporation until

they are declared. Interest on debt is a legal obligation of the corporation and must be paid

each year.

2. Debt must be repaid at some future date. To be a permanent source of capital, debt must be

periodically refinanced. Preferred stock generally does not mature.

3. Increasing the amount of debt on a balance sheet can adversely affect financial ratios.

35 Minutes, Medium PROBLEM 11–

MOBILE COMMUNICATIONS, INC.

a. General Journal 20__ Jan 6 Cash 2 8 0 0 0 0 Common Stock 4 0 0 0 0 Additional Paid-in Capital: Common Stock 2 4 0 0 0 0 Issued 20,000 shares of $2 par value common stock at $ per share. 7 Organization Costs 7 0 0 0 Common Stock 1 0 0 0 Additional Paid-in Capital: Common Stock 6 0 0 0 Issued 500 shares of common stock to Gordon in exchange for services relating to formation of the corporation.

Implied issuance price ($7,000 ^ 500 shares) = $14 per share.

12 Cash 2 5 0 0 0 0 10% Cumulative Preferred Stock 2 5 0 0 0 0 Issued 2,500 shares of $100 par value, 10%, cumulative preferred stock at par value. June 4 Land 2 2 5 0 0 0 Common Stock 3 0 0 0 0 Additional Paid-in Capital: Common Stock 1 9 5 0 0 0 Issued 15,000 shares of common stock in exchange for land valued at $225,000 (15,000 shares x $15). Nov 15 Dividends (Preferred Stock) 2 5 0 0 0 Dividends Payable 2 5 0 0 0 To record declaration of annual dividend of $10 per share on 2,500 preferred shares outstanding. Payable Dec. 20. Dec 20 Dividends Payable 2 5 0 0 0 Cash 2 5 0 0 0 To record payment of dividend declared Nov. 15. 31 Income Summary 1 0 6 5 0 0 Retained Earnings 1 0 6 5 0 0 To close the Income Summary account for the year. 31 Retained Earnings 2 5 0 0 0 Dividends (Preferred Stock) 2 5 0 0 0 To close the Dividends account.

DESKTOP PRODUCTS

QUANEX CORPORATION

In Thousands (Except for Per

35 Minutes, Strong PROBLEM 11–
- a. Par value of all preferred stock outstanding $
  - Par value per share of preferred stock $
  - Number of shares of preferred stock outstanding ($2,400,000 $100)
- b. Dividend requirement per share of preferred stock (7 1/2% x$100) $
  - Number of shares of preferred stock outstanding ( a )
  - Annual preferred stock dividend requirement ($7.50 x 24,000 shares) $^1 8 0 0 0
- c. Par value of all common stock outstanding $
  - Par value per share of common stock $
  - Number of shares of common stock outstanding ($900,000  $2 per share)
- d. Par value of all common stock issued $
  - Paid-in capital in excess of par: Common
  - Total issuance price of all common stock $
  - Number of shares of common stock issued ( c )
  - Average issuance price per share of common ($9,225,000  450,000 shares) $
- e. Par value of preferred stock $
  - Par value of common stock
    - Total legal capital $
- f. Total legal capital ( e ) $
  - Add: Additional paid-in capital: Common stock - Donated capital
    - Total paid-in capital $
- g. Total stockholders’ equity $
  - Less: Call price of preferred stock [24,000 shares ( a ) x $105 per share]
  - Equity of common stockholders $
  - Number of shares of common stock outstanding ( c )
  - Book value per share ($12,420,000  450,000 shares) $^2 7
- h. Retained earnings, beginning of the year $
  - Add: Net income for the year
    - Subtotal $
  - Less: Retained earnings, end of the year
    - Total dividends paid during the year $
  - Less: Dividends on preferred stock (part b )
    - Total dividends on common stock $
  - Number of common shares outstanding
    - Dividends per share of common stock ($1,912,500  450,000) $^4
35 Minutes, Medium PROBLEM 11–
- a. Par value of all common stock outstanding $ Share Amounts)
  - Par value per share 0.
  - Number of shares outstanding ($6,819/$0.50)
- b. Dividend requirement per share of preferred stock $
  - Numbers of shares of preferred stock outstanding
  - Annual dividends paid to preferred stockholders ($17.20 x 345,000) $
- c. Par value of preferred stock $
  - Par value of common stock
  - Additional paid-in capital
  - Total paid-in capital $
- d. Total stockholders’ equity $
  - Less: Preferred stock liquidation preference = ($250 x 345,000 shares)
  - Equity of common stockholders $
  - Number of shares of common stock outstanding
  - Book value per share ($151,342,000/13,638,000 shares) $

Accounting chapter 11 solution, Exercises of Accounting

Related documents

Partial preview of the text

Download Accounting chapter 11 solution and more Exercises Accounting in PDF only on Docsity!

CHAPTER 11

STOCKHOLDERS’ EQUITY:

PAID-IN CAPITAL

OVERVIEW OF EXERCISES, PROBLEMS, CASES,

AND INTERNET ASSIGNMENT

Exercises Topic

Learning

Objectives

Character of

Assignment

11–1 Form of organization 1, 2, 3 Personal, conceptual

11–2 Accounting terminology 1–9 Conceptual

11–3 Prepare equity section 4, 5 Mechanical, conceptual

11–4 Dividends on preferred &

common

4, 5 Mechanical, conceptual

11–5 Analyzing equity 4, 5, 6, 7 Conceptual, analytical

11–6 Issuing stock for noncash assets 2, 4 Conceptual

11–7 Reporting effects of transactions 4, 7 Conceptual

11–8 Computing book value 4, 5, 6, 7 Mechanical, conceptual

11–9 Treasury stock transactions 9 Mechanical, conceptual

11–10 Effects of stock splits 8 Conceptual

11–11 Treasury stock presentation 9 Conceptual, ethical, group,

communication

11–12 Reading an annual report 4, 7 Research, real— Tootsie Roll

Problems

11–1 Reporting stockholders’ equity 4, 5, 6 Conceptual, mechanical

11–2 Reporting stockholders’ equity 4, 5, 6 Conceptual, mechanical

11–3 Reporting stockholders’ equity 4, 5, 6 Conceptual, mechanical

11–4 Comprehensive equity problem 4, 5 Conceptual, mechanical

11–5 Analysis of equity 4, 5 Conceptual, mechanical

11–6 Comprehensive equity analysis 1–7 Analytical, communication, group,

real— Quanex Corporation

11–7 Par, book, and market values 4, 7 Conceptual, group, communication

11–8 Comprehensive equity with

treasury stock transactions

4, 5, 7, 9 Conceptual, mechanical

11–9 Comprehensive equity with

treasury stock transactions and

stock splits

4, 5, 7, 8, 9 Analytical, conceptual, mechanical

Cases Topic

Learning

Objectives

Character of

Assignment

11–1 Factors affecting market prices

of preferred and common

stocks

5, 7 Analytical, communication

11–2 Factors affecting market prices

of preferred and common

stocks

7 Analytical, communication, group,

real— McDonnell Douglas, Citicorp,

and Ventitex

11–3 Selecting a form of business

organization

1, 2, 3 Analytical, communication, research,

group

Business Week

Assignment

11–4 Business Week assignment 5 Conceptual, communication, group

assignment

Internet

Assignment

11–1 Stockholders’ equity items 4, 5, 7, 9 Internet research, real— Staples, Inc.

11–9 Parker Industries

A comprehensive equity problem involving treasury stock transactions in two

different years, preferred and common stock transactions, book value

calculations, and an understanding of stock splits.

30 Strong

11–1 Forecasting Changes in Stock Prices

Students are asked to explain whether the prices of preferred stock, common

stock, and convertible preferred stock are likely to rise or fall if profitability

increases dramatically and interest rates rise slightly. A problem that