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Chapter 13: Q3SE (page 708)
Journalizing issuance of stock—no-par
Wolcott Corporation issued 5,000 shares of no-par common stock for $2 per share on January 13. Record the stock issuance
Cash will be debited, andCommon stock- No par value will be credited with $10,000.
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What is the price/earnings ratio, and how is it calculated?
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
2. Compute Bianchi Company’s price/earnings ratio for 2018. Assume the company’s market price per share of common stock is $9. Round to two decimals.
Question: Identifying sources of equity, stock issuance, and dividends
Tillman Comfort Specialists, Inc. reported the following stockholders’ equity on its balance sheet at June 30, 2018:
Preferred Stock—5%, ? Par Value; 625,000 shares
authorized, 325,000 shares issued and outstanding
Paid-In Capital:
\( 1,300,000
1,350,000
Stockholders’ Equity
Paid-In Capital in Excess of Par—Common 2,600,000
Total Paid-In Capital 5,250,000
Retained Earnings 11,800,000
Total Stockholders’ Equity \) 17,050,000
Common Stock—$1 Par Value; 7,000,000 shares
authorized, 1,350,000 shares issued and outstanding
Requirements
3. Make two summary journal entries to record issuance of all the Tillman Comfort Specialists stock for cash. Explanations are not required.
Journalizing issuance of stock
Steller Systems completed the following stock issuance transactions:
May 19 Issued 1,700 shares of \(3 par value common stock for cash of \)10.50 per share.
Jun. 3 Issued 300 shares of \(9, no-par preferred stock for \)15,000 cash.
11 Received equipment with a market value of \(68,000 in exchange for 5,000 shares of the \)3 par value common stock.
Requirements
1. Journalize the transactions. Explanations are not required.
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.
e. Exposure to double taxation is evident.
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