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Chapter 13: 8RQ (page 707)
What account is used to record the premium when issuing common stock? What type of account is this?
Paid-In Capital in Excess of Par is used to record the premium when issuing common stock and is an equity account.
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Match the accounting terminology to the definitions.
1. Factoring receivables a. A monetary claim against a business or an individual.
2. Debtor b. The party to a transaction who takes on an obligation/payable.
3. Accounts receivable c. Using receivables as security (collateral) for a loan.
4. Maturity date d. The right to receive cash in the future from customers for goods sold or for services provided.
5. Receivable e. The date when a note is due.
6. Pledging receivables f. Selling receivables to a finance company or bank.
Computing rate of return on common stockholders’ equity Wyler, Inc.’s 2018 balance sheet reported the following items—with 2017 figures given for comparison:
Total Assets Total Liabilities and Stockholders’ Equity Total Liabilities Total Stockholders’ Equity (all common) WYLER, INC. Balance Sheet As of December 31, 2018, and December 31, 2017 \( 39,600 December 31, 2018 17,100 22,500 18,500 14,962 December 31, 2017 \) 39,600 \( 33,462 \) 33,462 Net income for 2018 was $3,690.
Compute Wyler’s rate of return on common stockholders’ equity for 2018.
Identifying advantages and disadvantages of a corporation
Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.
f. Entity can raise more money than a partnership or sole proprietorship
Journalizing dividend and treasury stock transactions, preparing a statement of retained earnings, and preparing stockholders’ equity
The balance sheet of Cullins Management Consulting, Inc. at December 31, 2017, reported the following stockholders’ equity:
Common Stock—\(10 Par Value; 200,000 sharesauthorized, 22,000 shares issued and outstandingPaid-In Capital:
163,000
\) 220,000
580,000
Retained Earnings
Total Stockholders’ Equity \( 743,000
Stockholders’ Equity
Paid-In Capital in Excess of Par—Common 360,000
Total Paid-In Capital
During 2018, Cullins completed the following selected transactions:
Feb. 6 Declared a 5% stock dividend on common stock. The market value of
Cullins’s stock was \)25 per share.
15 Distributed the stock dividend.
Jul. 29 Purchased 2,000 shares of treasury stock at \(25 per share.
Nov. 27 Declared a \)0.20 per share cash dividend on the common stock outstanding.
Requirements
1. Record the transactions in the general journal.
2. Prepare a retained earnings statement for the year ended December 31, 2018. Assume Cullins’s net income for the year was $87,000.
3. Prepare the stockholders’ equity section of the balance sheet at December 31, 2018.
What does earnings per share report, and how is it calculated?
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