Brief Exercise 18–2
($ in millions)
Cash (8 million shares x $12 per share) ..................................
Common stock (8 million shares x $1 par per share)..............
Paid-in capital—excess of par (remainder) ...................
96
8
88
Brief Exercise 18–3
Lewelling’s paid-in capital—excess of par will increase by $860,000: 4,000 hours x
$240 less $100,000 par.
Journal entry (not required):
Legal expense (4,000 hours x $240)
960,000
Common stock (100,000 shares x $1 par per share)
Paid-in capital—excess of par (remainder)
100,000
860,000
Brief Exercise 18–6
Horton’s total paid-in capital will decline by $17 million, the price paid to buy
back the shares.
Journal entry (not required):
($ in millions)
Common stock (2 million shares x $1 par) ..................................
Paid-in capital—excess of par (2 million shares x $9*) ................
Paid-in capital—share repurchase (difference) ....................
Cash (2 million shares x $8.50 per share) ..................................
2
18
3
17
* Paid-in capital—excess of par: $900 ÷ 100 million shares
Solutions Manual, Vol.2, Chapter 18
© The McGraw-Hill Companies, Inc., 2013
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Brief Exercise 18–7
Agee’s total paid-in capital will decline by $18 million because recording the
transaction involves a $1 million reduction of retained earnings and an $18
million reduction in paid-in capital accounts.
Journal entries (not required):
First buyback
($ in millions)
Common stock (1 million shares x $1 par) ..................................
1
Paid-in capital—excess of par (1 million shares x $15*) ...........
15
Paid-in capital—share repurchase (difference) ....................
2
Cash (1 million shares x $14) ..................................................
14
* $16 – $1 par
Second buyback
Common stock (1 million shares x $1 par) ..................................
Paid-in capital—excess of par (1 million shares x $15*) ...........
Paid-in capital—share repurchase (balance from first buyback) .
Retained earnings (difference)..................................................
Cash (1 million shares x $19) ..................................................
1
15
2
1
19
* $16 – $1 par
© The McGraw-Hill Companies, Inc., 2013
18–2
Intermediate Accounting, 7e
Brief Exercise 18–8
Jennings’s retained earnings will decline by $2 million because the $67 million
sale price is less than the sum of the cost of the treasury stock ($70 million) and
paid-in capital from the previous treasury stock sale ($1 million).
Journal entries (not required):
Purchase of treasury stock
($ in millions)
Treasury stock (2 million shares x $70) ...................................... 140
Cash ....................................................................................
140
First sale of treasury stock
Cash (1 million shares x $71) ......................................................
Treasury stock (1 million shares x $70) ..................................
Paid-in capital—share repurchase (remainder) ....................
Second sale of treasury stock
Cash (1 million shares x $67) ......................................................
Paid-in capital—share repurchase (balance from first sale) ........
Retained earnings (remainder) ..................................................
Treasury stock (1 million shares x $70) ..................................
71
70
1
67
1
2
70
Brief Exercise 18–10
Cox’s paid-in capital—share repurchase will increase by $9 million as
determined in the following journal entry:
($ in millions)
Cash (1 million shares x $29) ......................................................
Paid-in capital—share repurchase (difference) ....................
Treasury stock (1 million shares x $20*) ................................
29
9
20
* 2 million shares x $20 = $40 million (first million at $20)
1 million shares x $26 =
Solutions Manual, Vol.2, Chapter 18
26 million
$66 million
© The McGraw-Hill Companies, Inc., 2013
18–3
Brief Exercise 18–11
Declaration date
Retained earnings ..............................................................
Cash dividends payable (8,668 million shares x $.16) ......
($ in millions)
1,387
1,387
Date of record
no entry
Payment date
Cash dividends payable ...................................................
Cash ..............................................................................
1,387
1,387
Brief Exercise 18–13
($ in millions)
Retained earnings (3 million* shares at $25 per share) ..............
Common stock (3 million* shares at $1 par per share) ........
Paid-in capital—excess of par (remainder) .....................
* 5% x 60 million shares = 3 million shares
© The McGraw-Hill Companies, Inc., 2013
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75
3
72
Intermediate Accounting, 7e
Brief Exercise 18–14
If a stock split is not to be effected in the form of a stock dividend, no entry is
recorded. Since the shares double, but the balance in the common stock account
is not changed, the par per share is reduced, to $.50 in this instance.
Brief Exercise 18–15
($ in millions)
Paid-in capital—excess of par**
Common stock (60 million shares* x $1 par per share)
60
60
**alternatively, retained earnings may be debited
* 100% x 60 million shares = 60 million shares
If the per share par value of the shares is not to be changed, the stock
distribution is referred to as a "stock split effected in the form of a stock
dividend." In that case, the journal entry increases the common stock account by
the par value of the additional shares. This prevents the increase in shares from
reducing (by half in this case) the par per share. The par is $1 before and after
the split.
Solutions Manual, Vol.2, Chapter 18
© The McGraw-Hill Companies, Inc., 2013
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