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Chapter 13: 9RQ (page 707)
If stock is issued for assets other than cash describe the recording of this transaction
The stocks issued for assets other than cash are recorded at the market value of the assets exchanged or the market value of the corporate stock.
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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 Goldstein Management Consulting, Inc. at December 31, 2017, reported the following stockholders’ equity:
Common Stock—\(10 Par Value; 350,000 shares
authorized, 32,000 shares issued and outstanding
Paid-In Capital:
160,000
\) 320,000
650,000
Retained Earnings
Total Stockholders’ Equity \( 810,000
Stockholders’ Equity
Paid-In Capital in Excess of Par—Common 330,000
Total Paid-In Capital
During 2018, Goldstein completed the following selected transactions:
Feb. 6 Declared a 15% stock dividend on common stock. The market value of
Goldstein’s stock was \)25 per share.
15 Distributed the stock dividend.
Jul. 29 Purchased 2,300 shares of treasury stock at \(25 per share.
Nov. 27 Declared a \)0.10 per share cash dividend on the common stock outstanding.
Requirements
3. Prepare the stockholders’ equity section of the balance sheet at December 31, 2018.
Question: Journalizing a small stock dividend
Element Water Sports has 13,000 shares of \(1 par value common stock outstanding.
Element distributes a 5% stock dividend when the market value of its stock is \)15 per share.
Requirements
1. Journalize Element’s declaration of the stock dividend on August 15 and distribution on August 31.
Computing earnings per share, price/earnings ratio, and rate of return on common stockholders’ equity
Bianchi Company reported these figures for 2018 and 2017:
2018 2017
Income Statement—partial:
Net Income \( 34,380 \) 18,000
Dec. 31, 2018 Dec. 31, 2017
Balance Sheet—partial:
Total Assets \( 285,000 \) 280,000
Paid-In Capital:
Preferred Stock—11%, \(9 Par Value; 60,000 shares
authorized, 12,000 shares issued and outstanding
\) 108,000 \( 108,000
Common Stock—\)2 Par Value; 60,000 shares
authorized, 50,000 shares issued and outstanding
100,000 100,000
Paid-In Capital in Excess of Par—Common 14,000 14,000
Retained Earnings 60,500 38,000
Total Stockholders’ Equity \( 282,500 \) 260,000
Requirements
1. Compute Bianchi Company’s earnings per share for 2018. Assume the company paid the minimum preferred dividend during 2018. Round to the nearest cent.
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.
c. Transfer of ownership is easy.
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