Brief Exercise 15-1
Larkspur Corporation issued 310 shares of $8 par value common stock for $3,720.
Prepare Larkspur’s journal entry. (Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the
account titles and enter 0 for the amounts.)
Account Titles and Explanation
Cash
Debit
Credit
3,720
Common Stock
2,480
pital in Excess of Par - Common Stock
1,240
Common Stock = (310 x $8) = $2,480
Brief Exercise 15-2
Ayayai Corporation issued 660 shares of no-par common stock for $9,800.
Prepare Ayayai’s journal entry if (a) the stock has no stated value, and (b) the stock has a stated
value of $3 per share. (Credit account titles are automatically indented when amount is
entered. Do not indent manually. If no entry is required, select "No Entry" for the account
titles and enter 0 for the amounts.)
No. Account Titles and Explanation
(a)
Cash
Debit
9,800
Common Stock
(b)
Cash
Credit
9,800
9,800
Common Stock
1,980
Paid-in Capital
7,820
(b) Common Stock = (660 x $3) = $1,980
Brief Exercise 15-3
Pronghorn Corporation has the following account balances at December 31, 2017.
Common stock, $5 par value
$462,000
Treasury stock
94,000
Retained earnings
2,304,000
Paid-in capital in excess of par—common stock
1,320,000
Prepare Pronghorn’s December 31, 2017, stockholders’ equity section. (Enter account name only
and do not provide descriptive information.)
PRONGHORN CORPORATION
Stockholders’ Equity
December 31, 2017
$
Common Stock
462,000
Paid-in Capital
1,320,000
Total Paid-in Capital
1,782,000
Retained Earn
2,304,000
4,086,000
Less
:
94,000
Treasury Stoc
$
Total Stockholders' Equity
3,992,000
Brief Exercise 15-4
Headland Corporation issued 350 shares of $10 par value common stock and 119 shares of $50 par
value preferred stock for a lump sum of $17,010. The common stock has a market price of $20 per
share, and the preferred stock has a market price of $100 per share.
Prepare the journal entry to record the issuance. (Round intermediate calculations to 6 decimal
places, e.g. 0.546872 and final answers to 0 decimal places, e.g., 1,520. Credit account
titles are automatically indented when amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Cash
Debit
Credit
17,010
Preferred Stoc
5,950
Paid-in Capital
4,760
Common Stock
3,500
Paid-in Capital
2,800
Preferred Stock = (119 x $50) = $5,950
Common Stock = (350 x $10) = $3,500
FV of common (350 x $20)
$ 7,000
FV of preferred (119 x $100)
Total FV
11,900
$18,900
Allocated to common
Allocated to preferred
$7,000
$18,900
$11,900
$18,900
x $17,010 =
$ 6,300
x $17,010 =
10,710
$17,010
Brief Exercise 15-5
On February 1, 2017, Crane Corporation issued 3,800 shares of its $5 par value common stock for
land worth $38,900.
Prepare the February 1, 2017, journal entry. (Credit account titles are automatically indented
when amount is entered. Do not indent manually. If no entry is required, select "No Entry"
for the account titles and enter 0 for the amounts.)
Date
Feb. 1, 2017
Account Titles and Explanation
Land
Debit
Credit
38,900
Common Stock
19,000
Paid-in Capital
19,900
Common Stock = (3,800 x $5) = $19,000
Brief Exercise 15-6
Indigo Corporation issued 1,800 shares of its $10 par value common stock for $52,500. Indigo also
incurred $1,700 of costs associated with issuing the stock.
Prepare Indigo’s journal entry to record the issuance of the company’s stock. (Credit account titles
are automatically indented when amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Cash
Debit
Credit
50,800
Common Stock
18,000
Paid-in Capital
32,800
= ($52,500 – $1,700) = $50,800
Cash
Common Stock = (1,800 x $10)
= $18,000
Brief Exercise 15-7
Vaughn Corporation issued 460 shares of $100 par value preferred stock for $56,100.
Prepare Vaughn’s journal entry. (Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required, select "No Entry" for the account
titles and enter 0 for the amounts.)
Account Titles and Explanation
Cash
Debit
Credit
56,100
Preferred Stoc
46,000
Paid-in Capital
10,100
Preferred Stock = (460 x $100) = $46,000
Brief Exercise 15-8
Blue Inc. has outstanding 10,600 shares of $10 par value common stock. On July 1, 2017, Blue
reacquired 105 shares at $87 per share. On September 1, Blue reissued 62 shares at $91 per share.
On November 1, Blue reissued 43 shares at $84 per share.
Prepare Blue’s journal entries to record these transactions using the cost method. (Credit account
titles are automatically indented when amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
7/1/17
Account Titles and Explanation
Treasury Stoc
Debit
9,135
Cash
9/1/17
Cash
Treasury Stoc
Credit
9,135
5,642
5,394
Paid-in Capital
11/1/17
248
Cash
3,612
Paid-in Capital
129
Treasury Stoc
3,741
7/1/17
Treasury Stock = (105 x $87) = $9,135
9/1/17
Cash
= (62 x $91) = $5,642
Treasury Stock = (62 x $87) = $5,394
11/1/17 Cash
= (43 x $84) = $3,612
Treasury Stock = (43 x $87) = $3,741
Brief Exercise 15-9
Flounder Corporation has outstanding 19,000 shares of $5 par value common stock. On August 1,
2017, Flounder reacquired 200 shares at $74 per share. On November 1, Flounder reissued
the 200 shares at $64 per share. Flounder had no previous treasury stock transactions.
Prepare Flounder’s journal entries to record these transactions using the cost method. (Credit
account titles are automatically indented when amount is entered. Do not indent manually.
If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
8/1/17
Account Titles and Explanation
Treasury Stoc
Debit
14,800
Cash
11/1/17
14,800
Cash
12,800
Retained Earn
2,000
Treasury Stoc
8/1/17
Credit
14,800
Treasury Stock = (200 x $74) = $14,800
11/1/17 Cash
= (200 x $64) = $12,800
Brief Exercise 15-10
Splish Inc. declared a cash dividend of $1.75 per share on its 4 million outstanding shares. The
dividend was declared on August 1, payable on September 9 to all stockholders of record on August
15.
Prepare all journal entries necessary on those three dates. (Enter answers in dollars. Credit
account titles are automatically indented when amount is entered. Do not indent manually.
If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Aug. 1
Account Titles and Explanation
Retained Earn
Debit
7,000,000
Dividends Pay
Aug. 15
No Entry
7,000,000
0
No Entry
Sep. 9
Dividends Pay
Credit
0
7,000,000
Cash
7,000,000
Aug. 1 Retained Earnings = (4,000,000 x $1.75) = $7,000,000
Brief Exercise 15-11
Stellar Inc. owns shares of Pearl Corporation stock. At December 31, 2017, the securities were carried
in Stellar’s accounting records at their cost of $779,000, which equals their fair value. On September
21, 2018, when the fair value of the securities was $1,193,000, Stellar declared a property dividend
whereby the Pearl securities are to be distributed on October 23, 2018, to stockholders of record on
October 8, 2018.
Prepare all journal entries necessary on those three dates. (Credit account titles are automatically
indented when amount is entered. Do not indent manually. If no entry is required, select
"No Entry" for the account titles and enter 0 for the amounts.)
Date
Sep. 21
Account Titles and Explanation
Equity Investm
Debit
Credit
414,000
Unrealized Ho
414,000
(To record gain or loss)
Retained Earn
1,193,000
Property Divid
1,193,000
(To record property dividend)
Oct. 8
No Entry
No Entry
0
0
Oct. 23
Property Divid
1,193,000
Equity Investm
1,193,000
Sep. 21 Unrealized Holding Gain or Loss—Income = ($1,193,000 – $779,000) = $414,000
Brief Exercise 15-12
Martinez Mining Company declared, on April 20, a dividend of $466,000 payable on June 1. Of this
amount, $128,000 is a return of capital.
Prepare the April 20 and June 1 entries for Martinez. (Credit account titles are automatically
indented when amount is entered. Do not indent manually. If no entry is required, select
"No Entry" for the account titles and enter 0 for the amounts.)
Date
Apr. 20
Account Titles and Explanation
Debit
Retained Earn
338,000
Paid-in Capital
128,000
Credit
Dividends Pay
June 1
466,000
Dividends Pay
466,000
Cash
466,000
Apr. 20 Retained Earnings = ($466,000 – $128,000) = $338,000
Brief Exercise 15-13
Pearl Corporation has outstanding 479,000 shares of $10 par value common stock. The corporation
declares a 5% stock dividend when the fair value of the stock is $69 per share.
Prepare the journal entries for Pearl Corporation for both the date of declaration and the date of
distribution. (Credit account titles are automatically indented when amount is entered. Do
not indent manually. If no entry is required, select "No Entry" for the account titles and
enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
Declaration Date
Retained Earn
Common Stock
1,652,550
239,500
Paid-in Capital
1,413,050
Distribution Date
Common Stock
239,500
Common Stock
239,500
Retained Earnings
= 23,950 x $69 = $1,652,550
Common Stock Dividend Distributable = 23,950 x $10 = $239,500
Brief Exercise 15-14
Splish Corporation has outstanding 400,000 shares of $10 par value common stock. The corporation
declares a 100% stock dividend when the fair value of the stock is $63 per share.
Prepare the journal entries for both the date of declaration and the date of distribution. (Credit
account titles are automatically indented when amount is entered. Do not indent manually.
If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
Declaration Date
Retained Earn
4,000,000
Common Stock
4,000,000
Distribution Date
Common Stock
4,000,000
Common Stock
4,000,000
Common Stock Dividend Distributable = (400,000 x $10) = $4,000,000
Brief Exercise 15-15
Sheridan Corporation has outstanding 10,000 shares of $100 par value, 7% preferred stock
and 63,200 shares of $10 par value common stock. The preferred stock was issued in January 2017,
and no dividends were declared in 2017 or 2018. In 2019, Sheridan declares a cash dividend of
$315,000.
(a) Assume that the preferred are noncumulative.
How much dividend will the preferred stockholders receive?
Preferred stockholders would receive
$
70,000
How much dividend will the common stockholders receive?
Common stockholders would receive
$
245,000
(b) Assume that the preferred are cumulative.
How much dividend will the preferred stockholders receive?
Preferred stockholders would receive
$
210,000
How much dividend will the common stockholders receive?
Common stockholders would receive
$
105,000
(a) Preferred stockholders would receive $70,000 (7% x $1,000,000) and the remainder
of $245,000 ($315,000 – $70,000) would be distributed to common stockholders.
(b) Preferred stockholders would receive $210,000 (7% x $1,000,000 x 3) and the remainder
of $105,000 would be distributed to the common stockholders.
Exercise 15-2
Splish Corporation was organized on January 1, 2017. It is authorized to issue 9,100 shares of 8%,
$100 par value preferred stock, and 525,800 shares of no-par common stock with a stated value of
$1 per share. The following stock transactions were completed during the first year.
Jan.
10
Issued 80,170 shares of common stock for cash at $6 per share.
Mar. 1
Issued 5,410 shares of preferred stock for cash at $112 per share.
Apr. 1
Issued 24,730 shares of common stock for land. The asking price of the land was $91,570;
the fair value of the land was $80,170.
May 1
Issued 80,170 shares of common stock for cash at $9 per share.
Aug. 1
Issued 9,100 shares of common stock to attorneys in payment of their bill of $50,100 for
services rendered in helping the company organize.
Sept.
1
Issued 9,100 shares of common stock for cash at $11 per share.
Nov. 1
Issued 1,010 shares of preferred stock for cash at $106 per share.
Prepare the journal entries to record the above transactions. (Credit account titles are
automatically indented when amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Jan. 10
Account Titles and Explanation
Cash
Common Stock
Debit
Credit
481,020
80,170
Paid-in Capital
Mar. 1
Apr. 1
May 1
Aug. 1
Sept. 1
Nov. 1
Cash
400,850
605,920
Preferred Stoc
541,000
Paid-in Capital
64,920
Land
80,170
Common Stock
24,730
Paid-in Capital
55,440
Cash
721,530
Common Stock
80,170
Paid-in Capital
641,360
Organization E
50,100
Common Stock
9,100
Paid-in Capital
41,000
Cash
100,100
Common Stock
9,100
Paid-in Capital
91,000
Cash
107,060
Preferred Stoc
101,000
Paid-in Capital
6,060
Jan. 10 Cash (80,170 x $6) = $481,020
Common Stock (80,170 x $1) = $80,170
Paid-in Capital in Excess of Stated Value—Common Stock (80,170 x $5) = $400,850
Mar. 1
Cash (5,410 x $112) = $605,920
Preferred Stock (5,410 x $100) = $541,000
Paid-in Capital in Excess of Par—Preferred Stock (5,410 x $12) = $64,920
April 1
Common Stock (24,730 x $1) = $24,730
Paid-in Capital in Excess of Stated Value—Common Stock ($80,170 – $24,730) = $55,440
May 1
Cash (80,170 x $9) = $721,530
Common Stock (80,170 x $1) = $80,170
Paid-in Capital in Excess of Stated Value—Common Stock (80,170 x $8) = $641,360
Aug. 1
Common Stock (9,100 x $1) = $9,100
Paid-in Capital in Excess of Stated Value—Common Stock ($50,100 – $9,100) = $41,000
Sept. 1 Cash (9,100 x $11) = $100,100
Common Stock (9,100 x $1) = $9,100
Paid-in Capital in Excess of Stated Value—Common Stock (9,100 x $10) = $91,000
Nov. 1
Cash (1,010 x $106) = $107,060
Preferred Stock (1,010 x $100) = $101,000
Paid-in Capital in Excess of Par Value—Preferred Stock (1,010 x $6) = $6,060
Exercise 15-5
Splish Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value
preferred stock for a lump sum of $115,000.
(a) Prepare the journal entry for the issuance when the market price of the common shares is
$172 each and market price of the preferred is $215 each.
(b) Prepare the journal entry for the issuance when only the market price of the common stock is
known and it is $200 per share.
(Round answers to 0 decimal places, e.g. $1,225. Credit account titles are automatically
indented when amount is entered. Do not indent manually. If no entry is required, select
"No Entry" for the account titles and enter 0 for the amounts.)
No. Account Titles and Explanation
(a)
(b)
Cash
Debit
Credit
115,000
Common Stock
5,000
Paid-in Capital
87,000
Preferred Stoc
10,000
Paid-in Capital
13,000
Cash
115,000
Common Stock
5,000
Paid-in Capital
95,000
Preferred Stoc
10,000
Paid-in Capital
5,000
(a)
Fair value of Common (500 x $172)
$ 86,000
Fair value of Preferred (100 x $215)
21,500
$107,500
Allocated to Common: $86,000/$107,500 x $115,000
$ 92,000
Allocated to Preferred: $21,500/$107,500 x $115,000
23,000
Total allocation
$115,000
Common Stock (500 x $10) = $5,000
Paid-in Capital in Excess of Par—Common Stock ($92,000 – $5,000) = $87,000
Preferred Stock (100 x $100) = $10,000
Paid-in Capital in Excess of Par—Preferred Stock ($23,000 – $10,000) = $13,000
(b)
Lump-sum receipt
$115,000
Allocated to common (500 x $200)
(100,000)
Balance allocated to preferred
$ 15,000
Paid-in Capital in Excess of Par—Common Stock ($100,000 – $5,000) = $95,000
Paid-in Capital in Excess of Par—Preferred Stock ($15,000 – $10,000) = $5,000
Exercise 15-9
Cullumber Corporation has 11,800 shares of $100 par value, 7%, preferred stock and 53,500 shares
of $10 par value common stock outstanding at December 31, 2017.
Answer the questions in each of the following independent situations.
(a) If the preferred stock is cumulative and dividends were last paid on the preferred stock on
December 31, 2014, what are the dividends in arrears at December 31, 2017?
Amount of dividends in arrears
$
247,800
How should these dividends be reported?
The cumulative dividend is
not reported
as a liability.
(b) If the preferred stock is convertible into 8 shares of $10 par value common stock
and 3,300 shares are converted, what entry is required for the conversion assuming the preferred
stock was issued at par value? (Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required, select "No Entry" for the account
titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Preferred Stoc
Credit
330,000
Common Stock
264,000
Paid-in Capital
66,000
(c) If the preferred stock was issued at $106 per share, how should the preferred stock be reported in
the stockholders’ equity section? (Enter account name only and do not provide descriptive
information.)
Cullumber Corporation
Balance Sheet (Partial)
Paid-in Capital
$
Preferred Stoc
1,180,000
Paid-in Capital
70,800
(a) $1,180,000 x 7% = $82,600; $82,600 x 3 = $247,800. The cumulative dividend is disclosed in a
note to the stockholders’ equity section; it is not reported as a liability.
(b)
Preferred Stock = (3,300 x $100)
= $330,000
Common Stock = (3,300 x 8 x $10) = $264,000
(c)
Preferred stock, $100 par 7%,
11,800 shares issued
Paid-in Capital in Excess of Par (11,800 x $6)
$1,180,000
70,800
Exercise 15-13
The common stock of Vaughn Inc. is currently selling at $114 per share. The directors wish to reduce
the share price and increase share volume prior to a new issue. The per share par value is $10; book
value is $71 per share. 9.60 million shares are issued and outstanding.
Prepare the necessary journal entries assuming the following. (Enter amounts in dollars. Credit
account titles are automatically indented when amount is entered. Do not indent manually.
If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
(a) The board votes a 2-for-1 stock split.
(b) The board votes a 100% stock dividend.
No. Account Titles and Explanation
(a)
No Entry
Debit
0
No Entry
(b)
Credit
0
Retained Earn
96,000,000
Common Stock
96,000,000
(To record the declaration)
Common Stock
96,000,000
Common Stock
96,000,000
(To record the distribution)
(a) No entry—simply a memorandum note indicating the number of shares has increased to 19.20
million and par value has been reduced from $10 to $5 per share.
(b) Retained Earnings = ($10 x 9,600,000) = $96,000,000
Exercise 15-7
Joe Dumars Company has outstanding 40,000 shares of $5 par common stock which had been issued
at $30 per share. Joe Dumars then entered into the following transactions.
1.
Purchased 5,000 treasury shares at $45 per share.
2.
Resold 2,000 of the treasury shares at $49 per share.
3.
Resold 500 of the treasury shares at $40 per share.
Indicate the effect each of the three transactions has on the financial statement categories listed in
the table below, assuming Joe Dumars Company uses the cost method.
#
Assets
Liabilities
Stockholders’
Equity
Paid-in
Capital
Retained
Earnings
Net
Income
1.
Decrease
No effect
Decrease
No effect
No effect
No effect
2.
Increase
No effect
Increase
Increase
No effect
No effect
3.
Increase
No effect
Increase
Decrease
No effect
No effect
Exercise 15-22
Sweet Company’s ledger shows the following balances on December 31, 2017.
7% Preferred Stock—$10 par value, outstanding 21,700 shares
$ 217,000
Common Stock—$100 par value, outstanding 32,700 shares
3,270,000
Retained Earnings
593,000
Assuming that the directors decide to declare total dividends in the amount of $383,000, determine
how much each class of stock should receive under each of the conditions stated below. One year‘s
dividends are in arrears on the preferred stock.
(a) The preferred stock is cumulative and fully participating. (Round the rate of participation to 4
decimal places, e.g.1.4278%. Round answers to 0 decimal places, e.g. $38,487.)
Preferred
$
Common
$
38,079
344,921
(b) The preferred stock is noncumulative and nonparticipating. (Round answers to 0 decimal
places, e.g. $38,487.)
Preferred
$
Common
$
15,190
367,810
(c) The preferred stock is noncumulative and is participating in distributions in excess of a 10%
dividend rate on the common stock. (Round the rate of participation to 4 decimal places,
e.g.1.4278%. Round answers to 0 decimal places, e.g. $38,487.)
Preferred
$
Common
$
17,730
365,270
(a)
Preferred
Preferred stock is cumulative, fully participating
Common
Total
$38,079 $344,921 $383,000
The computation for these amounts is as follows:
Preferred Common
Dividends in arrears (7% x $10 x 21,700)
$15,190
Total
$15,190
Current dividend
Preferred
15,190
Common (7% x $100 x 32,700)
Balance dividend pro-rata
$228,900
7,699
116,021
244,090
123,720*
$38,079 $344,921 $383,000
*Additional
amount available for participation ($383,000 – $15,190 – $244,090)
$123,720
Par value of stock that is to participate ($217,000 + $3,270,000)
$3,487,000
Rate of participation $123,720 ÷ $3,487,000
3.5480%
Participating dividend
Preferred, 3.5480% x $217,000
$7,699
Common, 3.5480% x $3,270,000
116,021
$123,720
Note: Another way to compute the participating amount is as follows:
Preferred
Common
$217,000
$3,487,000
$3,270,000
$3,487,000
x $123,720 =
$7,699
x $123,720 =
116,021
$123,720
(b)
Preferred
Preferred stock is noncumulative and nonparticipating
Common
Total
$15,190 $367,810 $383,000
The computation for these amounts is as follows:
Current dividend (preferred) (7% x $10 x 21,700)
$15,190
Remainder to common ($383,000 – $15,190)
367,810
$383,000
(c)
Preferred
Preferred stock is noncumulative and participating in distributions
in excess of 10%
Common
Total
$17,730 $365,270 $383,000
The computation for these amounts is as follows:
Preferred Common
Total
Current year
Preferred (7% x $10 x 21,700)
$15,190
Common (7% x $3,270,000)
Additional 3% to common (3% x $3,270,000)
Balance dividend pro-rata
2,540
$15,190
$228,900
228,900
98,100
98,100
38,270
40,810*
$17,730 $365,270 $383,000
*Additional
$98,100)
amount available for participation ($383,000 – $15,190 – $228,900 –
$40,810
Par value of stock that is to participate ($217,000 + $3,270,000)
Rate of participation $40,810 ÷ $3,487,000
$3,487,000
1.1703%
Participating dividend
Preferred 1.1703% x $217,000
$2,540
Common 1.1703% x $3,270,000
38,270
$40,810