Accountancy 321 Red Book
Spring, 2010
COURSE POLICIES
The Red Book is so named because in the days before the World Wide Web
students purchased it at the Oxford Copy Shop and it had a red cover. These days it is
more convenient, and cheaper, for students to get the Red Book from the course Web
page. The Red Book contains course policies and several example accounting problems
that we will cover in class. Please bring the Red Book with you to each class.
Accountancy 321 is an upper division course in financial accounting which builds
upon the foundation students have constructed in Accountancy 221. Understanding
Accountancy 221 course material is therefore essential to success in this course. Our
purpose is to examine the underlying theory of financial reporting and apply the use of
this theory in several applications. We will use cooperative learning and interactive
lecture as the primary pedagogies in this course. Accounting is by nature a building
block discipline. I therefore encourage you to attend class regularly and to keep pace as
the course progresses. Students who adopt the strategy of “cramming” to pass
accounting examinations usually are disappointed with the grade they earn.
Miami Plan
Accountancy 321 is a course contained in the Liberal Education Thematic
Sequence, Financial Accounting and Reporting. The course will enable you to analyze
financial statements in such a way that you can discover the various business transactions
that the information contained in the financial statements represents. You will be
challenged to think critically about the ways business transactions should be
transformed and reported as information useful to interested readers. In doing this you
must understand the context of the capitalistic model and financial markets under
which accounting operates. You will engage with other learners in Cooperative
Learning teams to reflect and act on accounting concepts in a problem-solving mode.
Finally, by working on the accounting problems with your team you will integrate and
reinforce all four key components of the Miami Plan.
Teaching Philosophy
My philosophy of teaching revolves around four main ideas. First, I believe
student learning is enhanced by their active involvement of the subject at hand. Second,
students learn more readily when they believe the knowledge they are striving to grasp
has some future use past the particular course at hand. Third, variety is the spice of life.
This applies to learning as well. Finally, in order to achieve the best learning results, the
teacher must be devoted to continuous improvement. I will address each of these
attributes of my teaching philosophy in turn.
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Because I believe that students learn best when they are actively engaged with a
topic as opposed to being passive recipients of information, I became heavily involved
with the Cooperative Learning movement in the 1980’s. Cooperative Learning is a
structured form of teaching with small groups that incorporates the use of heterogeneous
teams, maintains individual accountability, promotes positive interdependence, instills
group processing, and sharpens social skills. Parker Palmer has stated that, “To teach is
to create a space where obedience to the truth is practiced.” By using Cooperative
Learning, I believe I am able to motivate students to actively engage with one another
around the “truth” contained in financial reporting. McKeachie, Pintrich, Lin, & Smith
state, “The best answer to the question, ‘What is the most effective method of teaching?’
is that it depends on the goal, the student, the content, and the teacher. But the next best
answer is students teaching other students.” Cooperative Learning by its very nature
harnesses this power of peer teaching.
A second aspect of my evolving teaching philosophy is that students are more
likely to learn a topic if they think it has some use other than attaining a credential. For
this reason, I began to explore Problem-Based Learning (PBL) in the late 1990’s. The
essential aspect about PBL is that the students confront a problem to be solved before
they are given any information as to how to solve it. This turns on its head the typical
pedagogy where students are given material, usually through lecture or demonstration,
and then they solve problems. When students are first given material, its usefulness is
unknown to them and there is therefore no intrinsic motivation for them to actively
engage it. Receiving and recording information in the traditional way is boring to many
students, because they must wait for a problem to appreciate its usefulness let alone
utilize it.
A PBL case more closely resembles situations that accountants encounter in their
profession. They first confront a problem. Then they seek ways to resolve the issue. In
the PBL class students are looking for information and processes rather than having the
material given to them. Thus the information and processes are perceived as being more
valuable in the PBL case because they have immediate impact of being used to solve a
problem that is being faced. In this environment students are encouraged to learn how to
learn.
Variety enhances student learning by keeping the students in a state of
expectation. Even the most well crafted pedagogy becomes rote if it is repeated
endlessly during the semester. For this reason, I intersperse several pedagogies in my
teaching. Although I primarily use Cooperative Learning and Problem-Based Learning,
on occasion I conduct a good old-fashioned lecture complete with PowerPoint
presentations. I also employ technology in the classroom with the internet and with
Excel spreadsheets. This adds variety to my primary use of the blackboard during whole
class discussion. My hope is that the students will come to the class wondering, “What
will he do next?”
Finally, during my teaching career I have proactively pursued continuous
improvement. I have annually attended teaching conferences such as the Lilly
Conference at Miami University for over twenty years. Over the years I have tried a
plethora of ideas, many of which did not work well for me. There is always risk in trying
Accountancy 321 Red Book—Spring, 2010
3
the innovative. Nevertheless, I have found it worth the risk because of the high reward,
in terms of student learning, for those activities that did work in my classes. In addition,
I have found ideas students bring to me about teaching and learning at time to be quite
insightful. I therefore welcome your comments. Cooperative Learning is described in
more detail in the following section.
Cooperative Learning
Over the course of my teaching career, I have become convinced of the truth of
two propositions. First, student learning is enhanced by their active participation in the
learning process as opposed to their passive reception of knowledge and information.
Second, students both learn better and enjoy learning more in an atmosphere of
cooperation rather than competition. Because of this I have become heavily involved in
the Cooperative Learning movement. Cooperative Learning is a structured form of small
group work based on positive interdependence, individual accountability, appropriate
group-formation, group processing, and social skill development in which students work
together toward a common goal. This class will be conducted in a Cooperative Learning
environment.
Therefore, this semester we will use Cooperative Learning structures and
Cooperative Learning groups extensively. The Cooperative Learning groups are an
integral part of the class. Students are responsible for the learning that goes on in the
groups, which are called structured learning teams.
Each student will be given a playing card. The card identifies three things:
1. The rank of the card identifies the team to which you belong.
2. In certain days the suit of the card will identify roles you will play on an
exercise.
3. The color of the suit of the card identifies your “suit partner.” You will
work with the person within your team who has the same color suit during
paired Cooperative Learning structures. Unless there is a missing team
member, wild cards will work with those students holding black suits. In
those cases where there is a team of three, the threesome will act as a pair.
You have the right to ask a question in your team; you have the duty to provide
assistance in your team. During teamwork you may ask me for help only after all
members of the team have been consulted.
Homework
The homework assigned on the syllabus is for your benefit to enhance your
learning. I recommend you record homework solutions on six-column accounting paper.
This will help you to prepare for recording solutions during examinations. If you have
questions about the use of accounting paper, please ask me early in the course. Our
Accountancy 321 Red Book—Spring, 2010
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primary method for reviewing homework problems will be by cooperative learning in
teams. Not all homework problems will be reviewed in class. Any questions about
homework which are not resolved in teams may be brought to the instructor for whole
class discussion. I encourage you to attempt the homework assigned on a daily basis.
Students who neglect this aspect of the course usually experience difficulty on
examinations.
You will note that some of the homework problems are indicated in bold italics
on the course outline. These homework solutions may be turned in for extra credit.
These solutions are due at the beginning of the class on the date indicated. Students who
turn in satisfactory solutions to these problems on either accounting paper or an Excel
worksheet will receive five points added to their instructor evaluation grade for that day
(see below).
Course Grade
The course grade is based upon instructor evaluations, performance on two
written, 75 minute examinations (combined with a Cooperative Examination Critique),
and one comprehensive final examination. I have decided to implement the “flexible
grading” system in this class. Under this system instead of using a set weight assigned to
each test grade component, I will establish a range of weights as set forth below:
Instructor evaluation—from 15% to 25%
First test—from 15% to 25%
Second test—from 15% to 25%
Final exam—from 25% to 55%
Within this range each of you may choose how much weight should be given to
each grade component. The total weights must sum top 100%. Alternatively, I will
assign those weights that will maximize your grade. The latter option is the one the vast
majority of students have chosen in the past.
The course letter grade is based on a percentage score set forth below. I normally
do not grade on the curve.
A+ —97%-100%
A —93%-96.99%
A– —90%-92.99%
B+ —87%-89.99%
B —83%-86.99%
B– —80%-82.99%
C+ —77%-79.99%
C —73%-76.99%
C– —70%-72.99%
D+ —67%-69.99%
D —63%-66.99%
D– —60%-62.99%
F —Below 60%
Instructor Evaluation
I will evaluate class participation on a daily basis. Grades will be based on both
the quantity and the quality of your participation during the class and will reflect your
overall contribution to the class understanding of the accounting material under
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5
discussion. Attendance does not equal participation; you will be evaluated on the overall
value of your comments, insights, observations, questions, and attitude in support of the
class goals and objectives.
I will give you feedback about your class participation on a regular basis through
Blackboard. You may ask for additional feedback at any time. The characteristics I look
for in my evaluation include responding to and/or asking questions during class
discussion, actively engaging the accounting topics during team work, and assisting other
students during team work.
Please note: There is some room for subjectivity here. I will do my best to
evaluate each student fairly and rationally, but just as in the work world, some measures
must be a matter of educated opinion. Part of your evaluation will be based on
“willingness to take criticism” on “the ability to work with others” and on “quality of
input to class and team discussion.” These criteria are subjective, but important. One
learning objective lesson of this class is for you to learn to recognize and handle
appropriately subjective measures of performance. My experience indicates that students
who actively engage the course material during class discussion and teamwork tend to
perform better on examinations.
An old English proverb states, “Punctuality is the courtesy of kings and queens.”
I consider habitual tardiness to be an indication of disrespect toward the discipline, the
instructor and fellow students. Those who are tardy for class will receive a class
participation grade of 60% for the day. If you believe you have a legitimate reason for
being tardy, be sure to see me immediately after class to avoid the lower grade.
I find cell phones ringing in class to be extremely discourteous and annoying.
Please either turn off you cell phone or set it on vibrate. A student whose cell phone
makes an audible signal in class will receive a 60% for the day on class participation.
Attendance
In order for Cooperative Learning and Problem-Based Learning to achieve their
full potential, all members of a structured learning team must be present. In my
experience students who have missed class have experienced difficulty keeping up with
the material. However, I recognize that it is unrealistic to require 100% of you to be
present 100% of the time. In the past I have been exasperated in attempts to classify
student absences into “excused” or “unexcused.” Accordingly, I have decided to
implement a sliding scale of grades to be given in the event of class absences. Students
who cut class more than six times may end up with a negative class participation grade
for the semester. The scale is given below:
Absence
Grade for the Day
1
2
3
4
5
6
70%
65%
60%
50%
0%
-100%
Accountancy 321 Red Book—Spring, 2010
7 and all subsequent
6
– 1,000%
Examinations
Mid-term examinations shall be seventy-five minutes in length. Many students
experience time pressure on accounting examinations, so budget your time. Please turn
in papers when called for.
Mid-term examinations will be given during class on the day scheduled. No
makeup examinations will be given. In the event of a bona fide and verifiable
emergency, the final examination grade will be substituted for a missed mid-term
examination grade. Inconvenience does not constitute an emergency. Students who miss
an examination without permission or verifiable emergency will receive a zero on the
examination.
On examination days you must bring accounting paper to class. Answers to
accounting problems and accounting analysis and schedules must be submitted on sixcolumn accounting paper. I suggest you bring at least ten sheets of accounting paper to
mid-term examinations.
You may answer questions in any order that you wish. However, each question
response must be started on a separate page. Write on only one side of the paper. Your
papers must be assembled in proper numerical sequence when you hand them in.
You may write on the examination itself. However, nothing you write on the
examination will be considered in my grading. Write any and all things you wish to be
considered for grading in the essays, memoranda, or accounting analysis you turn in.
You may use calculators on examinations. However, in the event that you forget
to bring your calculator, or it fails to operate, it is not my responsibility to rescue you by
providing a calculator. In such an event you may have to use the calculator that rests
between your shoulders.
Neatness of form and presentation will be evaluated on examinations. Organize
your work into an easy-to-follow format. Abbreviations are strictly prohibited on
examinations. You must support your answers on examinations with the details of the
calculations you have made. Amounts may be rounded to the nearest dollar; Rates
should be rounded to four decimal places. Identify (or label) all numbers used.
Schedules and statements should always have a three line heading identifying who, what
and when. Skip lines between journal entries. No partial credit will be awarded to
answers not properly supported by calculations.
During examinations students frequently approach me with questions. In the past
my policy has been to refuse to answer these questions in the interest of fairness to other
students. However, I have recently decided to change my policy to illustrate an
accounting principle, the cost of information. If you ask me a question on the
examination, I will tell you the cost of the information in terms of test points. You may
then decide whether to “buy” this additional information. If you decide to make the
purchase I will answer the question and deduct the points on your paper. There is no
penalty for asking the question. You decide whether the answer is worth the point
deduction. You may then proceed to work on the problem armed with your new
Accountancy 321 Red Book—Spring, 2010
7
information. Naturally, there will be no point charge if the examination has an error or
ambiguity.
I will be available to discuss any and all concerns over exam scores (i.e. class
standing) during my office hours (or by appointment). However, any questions with
respect to the grading of particular exam questions must be submitted in writing using
business memorandum format (see p. 10). Verbal appeals will not be considered until I
have evaluated a written appeal. The written appeal must be submitted within 48 hours
of the time of return of the examination. Otherwise a 50% late penalty will be assessed
on credit you might otherwise have earned. After 96 hours the penalty is 100%. I will
respond within a week of receiving any inquiry, also in writing.
This policy significantly reduces the chance of misunderstanding common in
"heat of-the-moment" verbal exchanges. In addition, many students find it easier to
clearly express their concerns through written communication. Finally, this procedure
ensures the complete documentation of any such exchanges. Therefore, please do not
come running to the front of the room after class to question or confront me about the
grading of an examination.
No examination or course grade will be given out early by phone. No grades will
be posted. If you desire your examination and/or course grade early, bring a selfaddressed, stamped envelope to class on the day of the exam.
Cooperative Examination Critique
An examination critique is scheduled for the class after each examination. I
consider the cooperative examination critique to be an integral part of the examination.
My purpose in conducting this exercise is to motivate you to study and review the
examination material one additional time. In the event scores on the exam are at a level
that warrant an upward scaling, I will give you an opportunity to earn additional points
by working an exam problem or problems in your structured learning teams. I will select
these problems from the examination that you have just taken, including multiple-choice
problems. You must be present at this class to be eligible for the additional points. In the
event an upward scaling of exam grades is not warranted, we will proceed with course
material.
Office Hours
My office hours are listed on the syllabus. If these are inconvenient, please feel
free to ask for an appointment at another time. You may call my office and leave a
message on my voice mail and I will return your call. I will also respond to inquiries that
you send me on e-mail. My e-mail address is cottelpg@muohio.edu. You may also
send e-mail to me by clicking the mailbox found on my World Wide Web home page
which may be found at http://www.sba.muohio.edu/cottelpg/. Students with special
learning needs are encouraged to meet with me to discuss these needs and to plan for
appropriate accommodations.
Accountancy 321 Red Book—Spring, 2010
8
Additional Policies
In the past some students have expressed concern over differences between
accounting procedures presented in class and those found in an accounting text. Many
diverse accounting methods exist. Therefore, in any instance where you discern a
difference between the “book method” and the “class method,” use the following
guidelines:



The “C” student may choose either method to arrive at the proper accounting
solution.
The “B” student should learn both methods.
The “A” student should learn both methods and be able to reconcile them.
Occasionally students ask me to cancel classes either right before or right after
scheduled vacation periods. University regulations prohibit me from doing this. I quote
from the Policy Manual, Section 4.1231:
“Members of the instructional staff shall conduct the entire
meeting of each class before and after each vacation period unless
excused by the chair or executive director concerned.”
Any observed or reported instance of academic dishonesty, as defined in the
Miami University Student Handbook, will be prosecuted to the fullest extent possible. If
you have any problems with this course that you believe you cannot resolve with me, you
should contact the Department Chair, Dr. Marc Rubin (310 Laws Hall, phone 529-6200).
Accountancy 321 Red Book—Spring, 2010
M E M O R A N D U M
DATE:
Insert the date signed
TO:
[Names]
FROM:
[Names] You should sign the memorandum here
RE:
[Subject]
[Type your memo text here]
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Accountancy 321 Red Book—Spring, 2010
10
Wooten Industries
Accounting for Bad Debts
The following information was obtained from the records of Wooten Industries:
Accounts Receivable
(end-of-year)
Allowance for Uncollectables
(end-of-year, all credit balances)
Sales
Credit
Cash
2006
2007
2008
$310,200
$325,700
$369,900
18,000
23,750
23,050
820,000
320,000
1,010,000
260,000
870,000
470,000
During 2006, 2007, and 2008, $15,400, $16,500, and $20,800 of accounts were written off
as uncollectable, respectively. In addition, during 2007, $3,200 of accounts previously
written off as uncollectable were recovered. During the three-year period, Wooten has
consistently used the same procedure and the same percentage in estimating bad debts
expense.
Required:
a. Which allowance procedure—i.e., percentage of total sales, percentage of credit
sales, or percentage of accounts receivable — has Wooten employed during this
three-year period?
b. What entry did Wooten make to record bad debts in 2006?
Accountancy 321 Red Book—Spring, 2010
11
Inventories
Dollar-Value LIFO
The following data relates to the inventories of the I. B. Goodman Company:
Year
Inventory at Year End Prices
base
2
3
4
5
$36,000
$57,500
$60,000
$65,800
$66,500
Price Index
1.00
1.25
1.50
1.40
1.75
Accountancy 321 Red Book—Spring, 2010
12
Inventories
Lower of Cost or Market
Consider the following inventory items:
Inventory Items
A
B
Selling price
$20
$20
Historical cost
$16
$15
Replacement cost
$15
$16
Units in inventory
100 units
300 units
C
$28
$20
$17
200 units
D
$36
$25
$20
400 units
E
$36
$20
$19
100 units
All items have a cost to complete and transfer of $6 and a normal profit of 25% of selling
price.
Required:
1. Fill out the following table:
A
B
C
D
Ceiling
Floor
Replacement cost
Market
Historical cost
Lower of cost or market
2. Give the two alternate journal entries that could be used to record inventory write
downs.
E
Accountancy 321 Red Book—Spring, 2010
13
Retail Methods
Beginning inventory
Purchases
Markups
Markup cancellations
Markdowns
Markdown cancellations
Net sales
Cost
Retail
$24,000
74,200
$ 40,000
100,000
9,000
(1,000)
(4,000)
2,000
(96,000)
The price index for beginning inventory is 104.
The price index for ending inventory is 111.
The base index is 100.
Accountancy 321 Red Book—Spring, 2010
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Capitalization of Interest
PSFT Company
PSFT Company is constructing a warehouse for use in its own operations. Initial
construction costs of $70,000 were made in early January. In early May $50,000 more
cost was incurred. In early October $40,000 additional cost was incurred. Construction
is still in process at year-end. In early January the company borrowed $100,000 at 12 %
specifically for this project. The rest of the project’s cost is financed from cash on hand.
The company has one million dollars of additional debt outstanding at an average interest
rate of 11%.
Required:
A. Calculate the amount of interest PSFT should capitalize in 2009.
B. Calculate the amount of interest PSFT should report on its 2009 income statement.
Accountancy 321 Red Book—Spring, 2010
15
Exchanges of Assets
Record the Journal Entry for the following transactions:
Case 1—Dissimilar Assets
Suppose CRW Bike shop owns a prefab building that was originally purchased
for $20,000. Accumulated depreciation is $14,000. The fair market value is $4,000 on
this building based on an appraisal. The building is traded for a van with an asking price
of $5,000.
Case 2—Similar Assets—Loss Situation
Suppose Fox Company trades in a computer for a new model. The old computer
was purchased for $20,000 and accumulated depreciation is $14,000. The fair market
value of the old computer is $3,500. The new computer has a list price of $6,000. The
salesman agrees to give a trade-in of $5,000 for the old computer.
Case 3— Similar Assets—Gain Situation—No Boot
Suppose Curry Company trades in a computer for a new model. The old
computer was purchased for $20,000 and accumulated depreciation is $18,000. The fair
market value of the old computer is $3,500. The new computer has a list price of $6,000.
The salesman agrees to give a trade-in of $5,000 for the old computer.
Case 4—Similar Assets—Gain Situation—Boot
Suppose Daniel Company has an old computer that originally cost $20,000 and
has accumulated depreciation of $14,000. Its fair market value is unknown. In exchange
for this computer Daniel receives a new one which recently sold for $9,000 on the open
market. In addition Daniel receives $1,000 cash.
Accountancy 321 Red Book—Spring, 2010
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Vineyard Fruit Company
Depreciation
On April 1 of year 1, Vineyard Fruit purchased a grape crusher for $10,000. The
installation cost was $200. The salvage value is estimated to be $456. Engineers
estimate that the machine will wear out in four years and that it is capable of crushing
24,000 bushels of grapes over its four year life. A schedule of actual grapes crushed
follows:
Year
1
2
3
4
5
Bushels Crushed
2,500
8,000
7,500
5,000
400
Vineyard is a calendar year company. The grape crusher is sold on April 1 of year 5.
Straight Line Method
Year
Base
Rate
Depreciation
Accumulated
Depreciation
1
2
3
4
5
(Vineyard example continues on the next page.)
Ending
Book
Value
Accountancy 321 Red Book—Spring, 2010
17
Vineyard Fruit Company
(Continued)
Production Method
Year
Base
Rate
Depreciation
Accumulated
Depreciation
1
2
3
4
5
(Vineyard example continues on the next page.)
Ending
Book
Value
Accountancy 321 Red Book—Spring, 2010
18
Vineyard Fruit Company
(Continued)
Sum-of-the-Years’ Digits Method
Year
Base
Rate
Depreciation
Accumulated
Depreciation
Ending
Book
Value
1
2
3
4
5
Double Declining Balance Method
Year
1
2
3
4
5
Base
Rate
Depreciation
Accumulated
Depreciation
Ending
Book
Value
Accountancy 321 Red Book—Spring, 2010
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Accountancy 321 Red Book—Spring, 2010
environmental liability
A company buys an oil rig for $2,000,000 on January 1, 2007. The life of the rig is 10
years and the company has a contractual obligation to dismantle the rig. The expected
cost to dismantle the rig at the end of 10 years is $400,000 (present value at 10% is
$154,220). 10% is an appropriate interest rate for this company. The company used
straight line depreciation.
Required:
a. Journal Entry at acquisition:
b. What expense should be recorded for 2007 as a result of these events?
c. What expense should be recorded in 2008 as a result of these events?
d. Fast forward to the year 2017. The company dismantles the oil rig as a cost of
$500,000. Record the journal entries.
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Accountancy 321 Red Book—Spring, 2010
21
Long-Term Liabilities
Accounting For Bonds
Livingston Corporation is a rapidly growing firm which operates a landscaping and
garden center. In order to purchase property and build a satellite center, the firm needs
cash and will sell bonds on the open market. The bonds have a face value of $12,100,000
and a coupon rate of 7% compounded and paid semiannually. The bonds were sold on
March 1, 2007 when the market rate of interest was 6%. The bonds will mature on
March 1, 2017.
Requirements:
a) Record the journal entry for the issue of these bonds.
b) Prepare an amortization schedule for these bonds.
c) Record the journal entry for December 31, 2009 and March 1, 2010.
d) Assume on June 1, 2010 Livingston retires this bond on the open market for
$12,850,000 plus accrued interest. Record the journal entry.
e) Ignore the results in (d). Instead assume Livingston gave real estate plus
accrued interest to the bondholders. The land is on the books for $1,500,000
and the building for $11,000,000 with accumulated depreciation of
$3,500,000. Record the journal entry.
Accounting for Installment Notes
Helen Corporation operates a high end pet watching business in Hamilton Ohio. Helen
wishes to upgrade some of its facilities and has approached the bank in an effort to
procure funds. Helen has asked the bank for a five year installment loan in the amount of
$1,600,000. The bank has informed Helen that the interest rate on the loan would be 8%
per annum and the payments will be made quarterly. The first payment will be due at the
signing of the note, April 1, 2008.
Required:
a) Calculate the amount of the quarterly payments.
b) Prepare an amortization schedule for the note.
c) Prepare the journal entry for April 1, 2008, October 1, 2008, December 31,
2008, and January 1, 2009.
Accountancy 321 Red Book—Spring, 2010
Treasury Stock
Presented below is the stockholders’ equity section of Stone Corporation at
December 31, 2009.
Common stock, par value $20, authorized 50,000 shares;
Issued and outstanding, 30,000 shares ...............................................$ 600,000
Contributed capital in excess of par value ..........................................................150,000
Retained earnings ...........................................................................................$2,300,000
Total ...................................................................................................$3,050,000
During 2009, the following transactions occurred relating to stockholders’ equity:
a)
b)
c)
d)
e)
f)
In March 1,000 shares were acquired at $28 per share.
In May 1,500 shares were acquired at $30 per share.
In July 1,200 shares of treasury stock were reissued at $32 per share.
In September 600 shares of treasury stock were reissued at $21 per share.
In October 300 shares were reissued at $34 per share
For the year ended December 31, 2009, Stone Corporation reported net income of
$110,000 and declared a dividend of $30,000.
Required:
1. Prepare journal entries for the treasury stock transactions using the cost method.
Assume a FIFO cost flow.
2. Prepare the stockholders’ equity section of Stone’s balance sheet at December 31,
2009.
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