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Chapter 15: Question 12 BE (page 811)
Graves Mining Company declared, on April 20, a dividend of \(500,000 payable on June 1. Of this amount, \)125,000 is a return of capital. Prepare the April 20 and June 1 entries for Graves.
The dividend paid by Graves Mining Company is $500,000.
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Ravonette Corporation issued 300 shares of \(10 par value common stock and 100 shares of \)50 par value preferred stock for a lump sum of \(13,500. The common stock has a market price of \)20 per share, and the preferred stock has a market price of $90 per share. Prepare the journal entry to record the issuance.
Twenty-five thousand shares reacquired by Elixir Corporation for \(53 per share were exchanged for undeveloped land that has an appraised value of \)1,700,000. At the time of the exchange, the common stock was trading at $62 per share on an organized exchange.
Instructions
a) Prepare the journal entry to record the acquisition of land assuming that the purchase of the stock was originally recorded using the cost method.
b) Briefly identify the possible alternatives (including those that are totally unacceptable) for quantifying the cost of the land and briefly support your choice.
Before Gordon Corporation engages in the treasury stock transactions listed on the next page, its general ledger reflects, among others, the following account balances (par value of its stock is \(30 per share).
Paid-in Capital in Excess of Par Common Stock Retained Earnings
Common Stock
\)99,000 \(270,000 \)80,000
Instructions
Record the treasury stock transactions (given below) under the cost method of handling treasury stock; use the FIFO method for purchase-sale purposes.
(a) Bought 380 shares of treasury stock at \(40 per share.
(b) Bought 300 shares of treasury stock at \)45 per share.
(c) Sold 350 shares of treasury stock at \(42 per share.
(d) Sold 110 shares of treasury stock at \)38 per share.
(Dividends and Splits) Myers Company provides you with the following condensed balance sheet information.
Asset
Current assets \(40,000
Equipment (net) 250,000
Intangibles 60,000
Total assets \)410,000
Liabilities and Stockholders’ Equity
Current and long-term liabilities \(100,000
Stockholders’ equity
Common stock (\)5 par) \( 20,000
Paid-in capital in excess of par 110,000
Retained earnings 180,000 310,000
Total liabilities and stockholders’ equity \)410,000
Instructions
For each of the following transactions, indicate the dollar impact (if any) on the following five items: (1) total assets, (2) common stock, (3) paid-in capital in excess of par, (4) retained earnings, and (5) stockholders’ equity. (Each situation is independent.)
The following is a summary of all relevant transactions of Vicario Corporation since it was organized in 2017. In 2017, 15,000 shares were authorized and 7,000 shares of common stock (\(50 par value) were issued at a price of \)57. In 2018, 1,000 shares were issued as a stock dividend when the stock was selling for \(60. Three hundred shares of common stock were bought in 2019 at a cost of \)64 per share. These 300 shares are still in the company treasury.
In 2018, 10,000 preferred shares were authorized and the company issued 5,000 of them (\(100 par value) at \)113. Some of the preferred stock was reacquired by the company and later reissued for \(4,700 more than it cost the company.
The corporation has earned a total of \)610,000 in net income after income taxes and paid out a total of $312,600 in cash dividends since incorporation.
Instructions
Prepare the stockholders’ equity section of the balance sheet in proper form for Vicario Corporation as of December 31, 2019. Account for treasury stock using the cost method.
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