Group Work Chapter 11
1.
Myers Inc.’s state charter Authorizes 2,000,000 shares. At December 31, 2007, Myers Inc. had a
total of 750,000 shares Unissued and 1,100,000 shares Outstanding. How many shares were in
Treasury at December 31, 2007?
Treasury Shares = $150,000
2.
Skye Inc.’s Board of Directors announced, on March 10, 2007, they would pay $130,000 in
dividends to stockholders.
Skye Inc. has $500,000 par, 8% shares of Preferred Stock outstanding on record. Assume Skye Inc.
did not pay dividends in year 2006 (the prior year).
On May 15th, the cash dividends were distributed.
a) What is the journal entry Skye Inc. will prepare on March 10, 2007 (Date of Declaration) to
recognize the commitment to pay dividends?
March 10, 2007
Retained Earnings
130,000
Dividends Payable 130,000
b) What is the journal entry Skye Inc. will prepare on May 15th (Date of Dividend Payment) to
recognize the cash payment to stockholders?
May 15, 2007
Dividends Payable
Cash
130,000
130,000
c) If the Preferred Stock is Cumulative, what portion of the dividend distribution would go to the
Preferred Stockholders? What remaining portion will go to Common Stockholders?
Cumulative Preferred Stock - $40,000 + $40,000 = $80,000
Common Stockholders
$50,000
d) If the Preferred Stock is Non-Cumulative, what portion of the dividend distribution would go to
the Preferred Stockholders? What remaining portion will go to Common Stockholders?
Non-Cumulative Preferred Stock - $40,000
Common Stockholders
$90,000
3.
Padilla Inc. issued 5,000 shares of stock at a market price of $36 per share. The Corporate Charter
for Padilla Inc. requires a PAR value of $1 per share. Prepare the journal entry to record this sale
of stock for Padilla Inc.
Cash
4.
$180,000
Common Stock
Paid In Capital in Excess of Par
$ 5,000
$175,000
a) On February 12, 2007, Berry Inc. purchased [reacquired] 5,000 shares of its $10 par value
common stock outstanding, paying $25 per share. Prepare the journal entry to record this purchase
of Treasury Stock.
Treasury Stock
$125,000
Cash
$125,000
b) On May 20, 2007, Berry Inc. reissued [sold] 1,000 shares of the Treasury Stock that was
acquired on February 12, 2007. The Treasury shares were sold at $35 per share. Prepare the journal
entry to record this reissue [sale] of the Treasury stock.
Cash
$35,000
Treasury Stock
Paid in Capital in Excess
25,000
10,000
c) On May 20, 2007, Berry Inc. reissued [sold] 1,000 shares of the Treasury Stock that was
acquired on February 12, 2007. The Treasury shares were sold at $20 per share. Prepare the journal
entry to record this reissue [sale] of the Treasury stock.
Cash
20,000
Retained Earnings
5,000
Treasury Stock
5.
25,000
Pearce Inc. reported total Stockholders’ Equity at 12/31/2008 of $406,000. During 2009, Pearce
Inc. reported Net Income of $48,000. Also during 2009, Pearce Inc. declared and paid Cash
Dividends to stockholders of $50,000, and they issued additional Common Stock during 2009 of
$30,000. Based on this information, what would be the balance of Stockholders’ Equity for
Pearce Inc. at 12/31/2009?
Stockholders’ Equity Beginning Balance
Net Income
Cash Dividends
Common Stock
Stockholders’ Equity Ending Balance
$406,000
$ 48,000
$( 50,000)
$ 30,000
$434,000