PRACTICE EXERCISES

PE 13–1A

Year 1 Year 2 Year 3

Amount distributed $40,000 $10,000 $120,000Preferred dividend (10,000 shares) 15,000 10,000 15,000 Common dividend (25,000 shares) $ 25,000 $$ 00 $105,000

Dividends per share:Preferred stock $1.50 $1.00 $1.50Common stock $1.00 None $4.20

PE 13–1B

Year 1 Year 2 Year 3

Amount distributed $20,000 $ 4,000 $40,000Preferred dividend (5,000 shares) 7,500 4,000 7,500 Common dividend (10,000 shares) $ 12,500 $ 0 $ 32,500

Dividends per share:Preferred stock $1.50 $0.80 $1.50Common stock $1.25 None $3.25

PE 13–2A

Aug. 3 Cash....................................................................... 5,760,000Common Stock................................................ 4,500,000Paid-In Capital in Excess of Stated Value.... 1,260,000

(45,000 shares × $128).

Sept. 22 Cash....................................................................... 150,000Preferred Stock............................................... 150,000

(2,000 shares × $75).

Nov. 4 Cash....................................................................... 240,000Preferred Stock............................................... 225,000Paid-In Capital in Excess of Par.................... 15,000

(3,000 shares × $80).

11

PE 13–2B

July 6 Cash....................................................................... 960,000Common Stock................................................ 960,000

(800,000 shares × $1.20).

Aug. 30 Cash....................................................................... 500,000Preferred Stock............................................... 500,000

(10,000 shares × $50).

Oct. 14 Cash....................................................................... 405,000Preferred Stock............................................... 375,000Paid-In Capital in Excess of Par.................... 30,000

(7,500 shares × $54).

PE 13–3A

July 16 Cash Dividends..................................................... 48,000Cash Dividends Payable................................ 48,000

Aug. 15 No entry required.

Sept. 30 Cash Dividends Payable...................................... 48,000Cash.................................................................. 48,000

PE 13–3B

Oct. 1 Cash Dividends..................................................... 90,000Cash Dividends Payable................................ 90,000

Nov. 1 No entry required.

Dec. 24 Cash Dividends Payable...................................... 90,000Cash.................................................................. 90,000

PE 13–4A

Feb. 13 Stock Dividends (300,000 × 3% × $63)............... 567,000Stock Dividends Distributable (9,000 × $40) 360,000Paid-In Capital in Excess of Par—Common Stock ($567,000 – $360,000).......... 207,000

Mar. 14 No entry required.

Apr. 30 Stock Dividends Distributable............................ 360,000Common Stock................................................ 360,000

22

PE 13–4B

May 10 Stock Dividends (250,000 × 2% × $60)............... 300,000Stock Dividends Distributable (5,000 × $50) 250,000Paid-In Capital in Excess of Par—Common Stock ($300,000 – $250,000).......... 50,000

June 9 No entry required.

Aug. 1 Stock Dividends Distributable............................ 250,000Common Stock................................................ 250,000

PE 13–5A

Jan. 24 Treasury Stock (6,000 × $18)............................... 108,000Cash.................................................................. 108,000

Mar. 15 Cash (4,500 × $21)................................................ 94,500Treasury Stock (4,500 × $18)......................... 81,000Paid-In Capital from Sale of Treasury Stock [4,500 × ($21 – $18)]............. 13,500

June 2 Cash (1,500 × $17)................................................ 25,500Paid-In Capital from Sale of Treasury Stock [1,500 × ($18 – $17)].................. 1,500

Treasury Stock (1,500 × $18)......................... 27,000

PE 13–5B

Oct. 2 Treasury Stock (12,000 × $6)............................... 72,000Cash.................................................................. 72,000

Nov. 15 Cash (8,400 × $9).................................................. 75,600Treasury Stock (8,400 × $6)........................... 50,400Paid-In Capital from Sale of Treasury Stock [8,400 × ($9 – $6)]................. 25,200

Dec. 22 Cash (3,600 × $5).................................................. 18,000Paid-In Capital from Sale of Treasury Stock [3,600 × ($6 – $5)]...................... 3,600

Treasury Stock (3,600 × $6)........................... 21,600

33

PE 13–6A

Stockholders’ EquityPaid-in capital:

Common stock, $80 par (30,000 shares authorized, 25,000 shares issued).................. $ 2,000,000

Excess of issue price over par............................. 315,000 $ 2,315,000From sale of treasury stock.................................. 33,000

Total paid-in capital......................................... $ 2,348,000Retained earnings....................................................... 1,112,000

Total........................................................................ $ 3,460,000Deduct treasury stock (2,000 shares at cost).......... 180,000 Total stockholders’ equity......................................... $ 3,280,000

PE 13–6B

Stockholders’ EquityPaid-in capital:

Common stock, $75 par (50,000 shares authorized, 45,000 shares issued).................. $ 3,375,000

Excess of issue price over par............................. 485,000 $ 3,860,000From sale of treasury stock.................................. 18,000

Total paid-in capital......................................... $ 3,878,000Retained earnings....................................................... 1,452,000

Total........................................................................ $ 5,330,000Deduct treasury stock (5,000 shares at cost).......... 420,000 Total stockholders’ equity......................................... $ 4,910,000

PE 13–7A

DYNAMIC LEADERS INC.Retained Earnings Statement

For the Year Ended July 31, 2008

Retained earnings, August 1, 2007............................ $ 988,500Net income................................................................... $325,000Less dividends declared............................................ 125,000 Increase in retained earnings..................................... 200,000 Retained earnings, July 31, 2008............................... $ 1,188,500

44

PE 13–7B

MAXIMA RETRACTORS INC.Retained Earnings Statement

For the Year Ended October 31, 2008

Retained earnings, November 1, 2007.............................. $ 2,906,000Net income........................................................................... $553,000Less dividends declared.................................................... 300,000 Increase in retained earnings............................................. 253,000 Retained earnings, October 31, 2008................................ $ 3,159,000

55

EXERCISES

Ex. 13–1

1st Year 2nd Year 3rd Year 4th Year

a. Total dividend distributed $ 40,000 $ 98,000 $ 120,000 $ 195,000

b. Preferred dividend $ 40,000 $ 50,000 $ 50,000 $ 50,000Preferred shares outstanding / 50,000 / 50,000 / 50,000 / 50,000 Preferred dividend per share $ 0.80 $ 1.00 $ 1.00 $ 1.00

Dividend for common shares(a. – b.) $ — $ 48,000 $ 70,000 $ 145,000Common shares outstanding — / 100,000 / 100,000 / 100,000 Common dividend per share — $ 0.48 $ 0.70 $ 1.45

Ex. 13–2

1st Year 2nd Year 3rd Year 4th Year

a. Total dividend distributed $ 6,000 $ 26,000 $ 4,000 $ 60,000

b. Preferred dividend $ 6,000 $ 10,000 $ 4,000 $ 10,000Preferred shares outstanding / 40,000 / 40,000 / 40,000 / 40,000 Preferred dividend per share $ 0.15 $ 0.25 $ 0.10 $ 0.25

Dividend for common shares(a. – b.) $ — $ 16,000 $ — $ 50,000Common shares outstanding — / 50,000 — / 50,000 Common dividend per share — $ 0.32 — $ 1.00

66

Ex. 13–3

a. Feb. 4 Cash................................................................ 1,920,000Common Stock......................................... 600,000Paid-In Capital in Excess of Par—Common Stock......................................... 1,320,000

Mar. 31 Cash................................................................ 1,620,000Preferred Stock......................................... 1,350,000Paid-In Capital in Excess of Par—Preferred Stock......................................... 270,000

b. $3,540,000 ($1,920,000 + $1,620,000)

Ex. 13–4

a. July 17 Cash................................................................ 5,400,000Common Stock......................................... 750,000Paid-In Capital in Excess ofStated Value.............................................. 4,650,000

Sept. 20 Cash................................................................ 800,000Preferred Stock......................................... 500,000Paid-In Capital in Excess of Par—Preferred Stock......................................... 300,000

b. $6,200,000 ($5,400,000 + $800,000)

Ex. 13–5

Nov. 10 Land......................................................................... 480,000Common Stock................................................. 120,000Paid-In Capital in Excess of Par..................... 360,000

77

Ex. 13–6

a. Cash.................................................................................. 240,000Common Stock........................................................... 240,000

b. Organizational Expenses................................................ 6,000Common Stock........................................................... 6,000

Cash.................................................................................. 216,000Common Stock........................................................... 216,000

c. Land.................................................................................. 75,000Building............................................................................ 240,000

Interest Payable*........................................................ 2,200Mortgage Note Payable............................................. 200,000Common Stock........................................................... 112,800

*An acceptable alternative would be to credit Interest Expense.

Ex. 13–7

Buildings................................................................................. 80,000Land......................................................................................... 100,000

Preferred Stock................................................................. 160,000Paid-In Capital in Excess of Par—Preferred Stock....... 20,000

Cash......................................................................................... 450,000Common Stock.................................................................. 400,000Paid-In Capital in Excess of Par—Common Stock....... 50,000

88

Ex. 13–8

Feb. 19 Cash........................................................................ 1,500,000Common Stock................................................. 1,500,000

27 Organizational Expenses...................................... 7,500Common Stock................................................. 7,500

Mar. 13 Land......................................................................... 80,000Buildings................................................................. 350,000Equipment............................................................... 45,000

Common Stock................................................. 450,000Paid-In Capital in Excess of Par—Common Stock................................................. 25,000

May 6 Cash........................................................................ 230,000Preferred Stock................................................. 200,000Paid-In Capital in Excess of Par—Preferred Stock................................................. 30,000

Ex. 13–9

July 2 Cash Dividends...................................................... 275,000Cash Dividends Payable.................................. 275,000

Aug. 1 No entry required.

Sept. 1 Cash Dividends Payable....................................... 275,000Cash................................................................... 275,000

99

Ex. 13–8

Feb. 19 Cash........................................................................ 1,500,000Common Stock................................................. 1,500,000

27 Organizational Expenses...................................... 7,500Common Stock................................................. 7,500

Mar. 13 Land......................................................................... 80,000Buildings................................................................. 350,000Equipment............................................................... 45,000

Common Stock................................................. 450,000Paid-In Capital in Excess of Par—Common Stock................................................. 25,000

May 6 Cash........................................................................ 230,000Preferred Stock................................................. 200,000Paid-In Capital in Excess of Par—Preferred Stock................................................. 30,000

Ex. 13–9

July 2 Cash Dividends...................................................... 275,000Cash Dividends Payable.................................. 275,000

Aug. 1 No entry required.

Sept. 1 Cash Dividends Payable....................................... 275,000Cash................................................................... 275,000

99