BRIEF EXERCISE 11-1
The advantages and disadvantages of a corporation are as follows:
Advantages
Separate legal existence
Limited liability of stockholders
Transferable ownership rights
Ability to acquire capital
Continuous life
Corporate management—
professional managers
Disadvantages
Corporate management—
separation of ownership
and management
Government regulations
Additional taxes
EXERCISE 11-2
June
July
Nov.
12
11
28
Cash ..........................................................
Common Stock ..................................
Paid-in Capital in Excess of Par
Value—Common Stock ..................
300,000
Cash
.....................................................
Preferred Stock .................................
Paid-in Capital in Excess of Par
Value—Preferred Stock .................
318,000
Treasury Stock—Common ......................
Cash ...................................................
9,000
80,000
220,000
300,000
18,000
9,000
EXERCISE 11-6
(a) June 15
Cash Dividends ..................................
Dividends Payable ......................
103,500
103,500
(60,000 + 9,000) x $1.50
July 10
Dec. 15
Dividends Payable .............................
Cash ............................................
103,500
Cash Dividends ..................................
Dividends Payable ......................
116,800
103,500
116,800
(69,000 + 4,000) x $1.60
(b) In the retained earnings statement, dividends of $220,300 will be
deducted.
On the balance sheet Dividends Payable of $116,800 will be reported
as a current liability.
EXERCISE 11-7
Entries for stock dividend (4,050 shares):
RE ……………… .............................................. 68,850
Stock dividends to be distributed ......................
Paid in Cap. in excess of par-common ..............
32,400
36,450
Stock dividends to be distributed……………..32,400
Common stock……………………………….
32,400
Entries for stock split – none. Notational entry indicating a 2 for 1
split and a reduction of par value to $4 per share is appropriate but
not required.
Stockholders’ equity
Paid-in capital
Retained earnings
Total stockholders’
equity
Outstanding shares
Before
Action
After Stock
Dividend
After Stock
Split
$ 648,000
400,000
$ 716,850
331,150
$ 648,000
400,000
$1,048,000
81,000
$1,048,000
85,050
$1,048,000
162,000
EXERCISE 11-8
WELLS FARGO & COMPANY
Partial Balance Sheet
December 31, 2009
(in millions)
Stockholders’ equity
Paid-in capital
Capital stock
Preferred stock ................................................
Common stock, $123 par value,
6 billion shares authorized,
5,245,971,422 shares issued, and
5,178,624,593 shares outstanding ..............
Total capital stock ......................................
Additional paid-in capital
In excess of par value—common stock .........
Total paid-in capital ...................................
Retained earnings .................................................
Total paid-in capital and retained
earnings .................................................
Less: Treasury stock (67,346,829 shares) ...........
Total stockholders’ equity .........................
$8,485
8,743
$ 17,228
52,878
70,106
41,563
111,669
2,450
$109,219
EXERCISE 11-10
SATHER INC.
Partial Balance Sheet
December 31, 2012
Stockholders’ equity
Paid-in capital
Capital stock
8% Preferred stock, $50 par value,
40,000 shares authorized,
14,000 shares issued........................
Common stock, no-par, $1 stated
value, 400,000 shares authorized,
250,000 shares issued and 241,000
outstanding .......................................
Total capital stock ........................
Additional paid-in capital
In excess of par value—
preferred stock .................................
In excess of stated value—
common stock ..................................
Total additional paid-in capital ....
Total paid-in capital......................
Retained earnings (See Note R)........................
Total paid-in capital and
retained earnings ......................
Less: Treasury stock
(9,000 common shares) .........................
Total stockholders’ equity ...........
$ 700,000
250,000
$ 950,000
24,000
1,200,000
1,224,000
2,174,000
920,000
3,094,000
(64,000)
$3,030,000
Note R: Retained earnings restricted for plant expansion, $100,000.
PROBLEM 11-2A
(a) Feb.
1
Mar. 20
Oct.
Nov.
Dec.
1
1
1
Cash ..........................................................
Common Stock (5,000 X $4) .............
Paid-in Capital in Excess of
Stated Value—Common Stock......
30,000
Treasury Stock—Common (1,000 X $7) ..
Cash ..................................................
7,000
Dividends ($300,000 X .07) ......................
Dividends Payable ............................
21,000
Dividends Payable ...................................
Cash ..................................................
21,000
Dividends .................................................
124,500
20,000
10,000
7,000
21,000
21,000
[250,000 + 5,000 – (5,000 + 1,000)] X $.50
Dividends Payable ............................
Dec. 31
31
31
124,500
Income Summary .....................................
Retained Earnings ............................
280,000
Retained Earnings ...................................
Dividends
($21,000 + $124,500) ........................
145,500
Dividends Payable ...................................
Cash ..................................................
124,500
280,000
145,500
124,500
BYP 11-1
FINANCIAL REPORTING PROBLEM
(a) The common stock has a par value of $0.69 4/9 per share.
(b) There are 160 million shares authorized (120 million class A and 40
million class B) of which 55,721,000 (35,802,000 + 19,919,000) are
issued. The percentage is 35% (55,721,000 ÷ 160,000,000).
(c)
2009
The shares outstanding were
*55,721,000 – 67,000
(d) Payout ratio=
55,645,000*
2008
54,950,000**
**55,015,000 – 65,000
$17,790
= 33.3%
$53,475
EPS = $.95
Return on Common Stockholders’ Equity
Net Income – Pref. Stk. Dividends/ Avg. Com. Stockholders’
Equity
53,475 – 0 / ((652,485 + 634,770) /2) = 8.3%