Chapter 12
Stockholders Equity
Stock and Treasury Stock Transactions
E12-3, E12-5, E12-6, E12-9
E12-3 Authorizing and Issuing Stock
Prepare entries for each event:
1. Authorized to issue: (a) 100,000 shares of $100 par value , 8%
preferred stock (b) 150,000 shares of no-par, $5 preferred stock;
and (c) 250,000 shares of $5 par value common stock.
2. Issued 10,000 shares of $5 par value common stock for $30 per
share.
E12-3 Authorizing and Issuing Stock
Prepare entries for each event:
3. Issued 25,000 shares of the $100 par value preferred stock for $150
per share.
4. Issued 50,000 shares of no-par preferred stock for $50 each.
E12-5 Treasury Stock
Company was incorporated on 4.1.12 and was authorized to issue
100,000 shares of $5 par value common stock and 10,000 shares of
$8, no-par preferred stock.
a. Record the following transactions:
1. Issued 25,000 shares of common stock in exchange for
$500,000 cash.
2. Issued 5,000 shares of preferred stock in exchange for
$60,000 cash.
E12-5 Treasury Stock
Company was incorporated on 4.1.12 and was authorized to issue
100,000 shares of $5 par value common stock and 10,000 shares of
$8, no-par preferred stock.
a. Record the following transactions:
3. Purchased 3,000 common shares for $15 per share and held
them in the treasury.
4. Sold 1,000 treasury shares for $18 per share.
5. Issued 1,000 treasury shares to executives who exercised
stock options for a reduced price of $5 per share.
E12-5 Treasury Stock
a.
1.
2.
3.
4.
5.
b.
Company was incorporated on 4.1.12
and was authorized to issue 100,000
shares of $5 par value common stock
and 10,000 shares of $8, no-par
preferred stock.
T accounts:
Issued 25,000 shares of common
stock in exchange for $500,000
cash.
Issued 5,000 shares of preferred
stock in exchange for $60,000 cash.
Purchased 3,000 common shares
for $15 per share and held them in
the treasury.
Sold 1,000 treasury shares for $18
per share.
Issued 1,000 treasury shares to
executives who exercised stock
options for a reduced price of $5
per share.
Assume company
generated $500,000 in net
income in 2012 and did
not declare any dividends.
Prepare the stockholders’
equity section of the
balance sheet as of
12.31.2012.
E12-6 Treasury Stock
12.31.2011 Shareholders’ section
Common stock
$80,000
Additional paid-in capital
10,000
Retained earnings
60,000
Total shareholders’ equity
$150,000
During 2012, the company entered into the following transactions. Provide the journal
entries for each transaction:
1. Purchased 1,000 shares of treasury stock for $60 per share.
2. As part of a compensation package, reissued half of the treasury shares to
executives who exercised stock options for $20 per share.
3. Reissued the remainder of the treasury stock on the open market for $66 per
share.
E12-6 Treasury Stock
12.31.2011 Shareholders’ section
Common stock
Additional paid-in capital
10,000
Retained earnings
60,000
Total shareholders’ equity
During 2012, the company entered into the
following transactions:
1.
2.
3.
a.
$80,000
Purchased 1,000 shares of
treasury stock for $60 per share.
As part of a compensation
package, reissued half of the
treasury shares to
executives who exercised stock
options for $20 per share.
Reissued the remainder of the
treasury stock on the open market
for $66 per share.
Prepare the shareholders’ equity
section of the balance sheet as of
12.31.2012. Company generated
$20,000 in net income and did not
declare dividends during 2012.
$150,000
E12-6 Treasury Stock
12.31.2011 Shareholders’ section
Common stock
$80,000
Additional paid-in capital
10,000
Retained earnings
60,000
Total shareholders’ equity
$150,000
b. What portion of the additional paid-in capital account is attributed to treasury stock
transactions?
Sample Co. Shareholders’ Equity
Common stock, $1 par value, 500,000 shares
authorized, 80,000 shares issued, and
75,000 shares outstanding
Common stock dividends distributable
Preferred stock, $100 par value, 1,000 shares
authorized, 100 shares issued and
outstanding
Paid in capital on common
$ 20,000
Paid in capital on preferred
3,000
Paid in capital on treasury stock
2,000
Retained earnings:
Unappropriated
$18,000
Appropriated
4,000
Less: Treasury stock, 5,000 shares (at cost)
Less: Other comprehensive income items
(unrealized loss on AFS securities)
Total Shareholders’ Equity
$ 80,000
2,000
10,000
25,000
22,000
(6,000)
(2,000)
$131,000
Retained Earnings
We will be expanding the basic retained earnings formula
in this chapter. Now the Statement of Retained Earnings
will include the following:
RE, beginning (unadjusted)
Add/Subtract: Prior period adjustment
RE, beginning (restated)
Add: net income
Less dividends:
Cash dividends-common
Cash dividends - preferred
Stock dividends
Property dividends
Less: Adjustment for TS transactions
Appropriation of RE
RE, ending
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
E12-9 Inferring Transactions from SHE
Preferred stock (no par)
Common stock ($1 par value)
2012
2011
$ 700
$ 400
1,000
900
40
10
20
---
130
150
Additional paid-in capital:
Common stock
Treasury stock
Less Treasury stock
Provide the journal entries for the
following:
a. Issuance of preferred stock
during 2012.
b.Issuance of common stock
during 2012.
c.Sale of treasury stock during
2012.