Chapter 13

Electro-Rad Inc., a developer of radiology equipment, has stock outstanding as follows: 50,000 shares of \(2 \%\), preferred stock of \(\$ 50\) par, and 100,000 shares of \(\$ 25\) par common. During its first four years of operations, the following amounts were distributed as dividends: first year, \(\$ 40,000\); second year, \(\$ 98,000\); third year, \(\$ 120,000\); fourth year, \(\$ 195,000\). Calculate the dividends per share on each class of stock for each of the four years.

CompuLead Inc., a software development firm, has stock outstanding as follows: 40,000 shares of \(1 \%\), preferred stock of \(\$ 25\) par, and 50,000 shares of \(\$ 75\) par common. During its first four years of operations, the following amounts were distributed as dividends: first year, \(\$ 6,000\); second year, \(\$ 26,000\); third year, \(\$ 4,000\); fourth year, \(\$ 60,000\). Calculate the dividends per share on each class of stock for each of the four years.

On February 4, Cinderella Rocks Inc., a marble contractor, issued for cash 30,000 shares of \(\$ 20\) par common stock at \(\$ 64\), and on March 31 , it issued for cash 18,000 shares of \(\$ 75\) par preferred stock at \(\$ 90\). a. Journalize the entries for February 4 and March 31 . b. What is the total amount invested (total paid-in capital) by all stockholders as of March 31 ?

On July 17, America Carpet Inc., a carpet wholesaler, issued for cash 150,000 shares of no-par common stock (with a stated value of \(\$ 5\) ) at \(\$ 36\), and on September 20, it issued for cash 10,000 shares of \(\$ 50\) par preferred stock at \(\$ 80\). a. Journalize the entries for July 17 and September 20, assuming that the common stock is to be credited with the stated value. b. What is the total amount invested (total paid-in capital) by all stockholders as of September 20?

On November 10, Craddock's Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 15,000 shares of \(\$ 8\) par common stock with a current market price of \(\$ 32\). Journalize the entry to record the transaction.

Country Sounds Corp., an electric guitar retailer, was organized by Julie Arnold, Joe Harris, and Scott Pickens. The charter authorized 500,000 shares of common stock with a par of \$12. The following transactions affecting stockholders' equity were completed during the first year of operations: a. Issued 20,000 shares of stock at par to Julie Arnold for cash. b. Issued 500 shares of stock at par to Scott Pickens for promotional services provided in connection with the organization of the corporation, and issued 18,000 shares of stock at par to Scott Pickens for cash. c. Purchased land and a building from Joe Harris. The building is mortgaged for \(\$ 200,000\) for 25 years at \(7 \%\), and there is accrued interest of \(\$ 2,200\) on the mortgage note at the time of the purchase. It is agreed that the land is to be priced at \(\$ 75,000\) and the building at \(\$ 240,000\), and that Joe Harris's equity will be exchanged for stock at par. The corporation agreed to assume responsibility for paying the mortgage note and the accrued interest. Journalize the entries to record the transactions.

Heritage Products Inc., a wholesaler of office products, was organized on February 19 of the current year, with an authorization of 60,000 shares of \(3 \%\) preferred stock, \(\$ 40\) par and 300,000 shares of \(\$ 75\) par common stock. The following selected transactions were completed during the first year of operations: Feb. 19. Issued 20,000 shares of common stock at par for cash. 27\. Issued 100 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation. Mar. 13. Issued 6,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of \(\$ 80,000, \$ 350,000\), and \(\$ 45,000\), respectively. May 6. Issued 5,000 shares of preferred stock at \(\$ 46\) for cash. Journalize the transactions.

The dates of importance in connection with a cash dividend of \(\$ 275,000\) on a corporation's common stock are July 2, August 1, and September 1. Journalize the entries required on each date.

Earthworks Health Co. is an HMO for 12 businesses in the St. Louis area. The following account balances appear on the balance sheet of Earthworks Health Co.: Common stock \((400,000\) shares authorized), \(\$ 100\) par, \(\$ 30,000,000\); Paid-in capital in excess of par-common stock, \(\$ 4,500,000\); and Retained earnings, \(\$ 50,600,000\). The board of directors declared a \(2 \%\) stock dividend when the market price of the stock was \(\$ 120\) a share. Earthworks Health Co. reported no income or loss for the current year. a. Journalize the entries to record (1) the declaration of the dividend, capitalizing an amount equal to market value, and (2) the issuance of the stock certificates. b. Determine the following amounts before the stock dividend was declared: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders' equity. c. Determine the following amounts after the stock dividend was declared and closing entries were recorded at the end of the year: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders' equity.

Mountain Springs Inc. bottles and distributes spring water. On May 2 of the current year, Mountain Springs reacquired 3,000 shares of its common stock at \(\$ 72\) per share. On August 14, Mountain Springs sold 2,500 of the reacquired shares at \(\$ 76\) per share. The remaining 500 shares were sold at \(\$ 70\) per share on November 7 . a. Journalize the transactions of May 2, August 14, and November 7 . b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year? c. I?or what reasons might Mountain Springs have purchased the treasury stock?

Azalea Gardens Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On September 9 of the current year, Azalea Gardens Inc. reacquired 12,000 shares of its common stock at \(\$ 89\) per share. On October \(31,10,500\) of the reacquired shares were sold at \(\$ 92\) per share, and on December 4,900 of the reacquired shares were sold at \(\$ 95\). a. Journalize the transactions of September 9 , October 31 , and December 4 . b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year? c. What is the balance in Treasury Stock on December 31 of the current year? d. How will the balance in Treasury Stock be reported on the balance sheet?

Tacoma Inc. bottles and distributes spring water. On June 12 of the current year, Tacoma Inc. reacquired 15,000 shares of its common stock at \(\$ 48\) per share. On August 10, Tacoma Inc. sold 9,000 of the reacquired shares at \(\$ 50\) per share. The remaining 6,000 shares were sold at \(\$ 47\) per share on December \(20 .\) a. Journalize the transactions of June 12, August 10, and December 20 . b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year? c. Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the balance sheet? d. For what reasons might Tacoma Inc. have purchased the treasury stock?

The following accounts and their balances appear in the ledger of Heart and Saul Inc. on April 30 of the current year: \(\begin{array}{lr}\text { Common Stock, } \$ 50 \text { par } & \$ 900,000 \\\ \text { Paid-In Capital in Excess of Par } & 110,000 \\ \text { Paid-In Capital from Sale of Treasury Stock } & 42,000 \\ \text { Retained Earnings } & 3,178,000 \\ \text { Treasury Stock } & 210,000\end{array}\) Prepare the Stockholders' Equity section of the balance sheet as of April 30 . Twenty-five thousand shares of common stock are authorized, and 3,500 shares have been reacquired.

Sports Car Inc. retails racing products for BMWs, Porsches, and Ferraris. The following accounts and their balances appear in the ledger of Sports Car Inc. on November 30, the end of the current year: \(\begin{array}{lr}\text { Common Stock, } \$ 5 \text { par } & \$ 875,000 \\\ \text { Paid-In Capital in Excess of Par-Common Stock } & 700,000 \\ \text { Paid-In Capital in Excess of Par-Preferred Stock } & 25,000 \\ \text { Paid- In Capital from Sale of Treasury Stock-Common } & 16,000 \\ \text { Preferred } 3 \% \text { Stock, } \$ 75 \text { par } & 937,500 \\ \text { Retained Earnings } & 2,338,000 \\ \text { Treasury Stock-Common } & 165,000\end{array}\) Twenty thousand shares of preferred and 400,000 shares of common stock are authorized. There are 22,000 shares of common stock held as treasury stock. Prepare the Stockholders' Equity section of the balance sheet as of November 30 , the end of the current year.

Stillwater Corporation, a manufacturer of industrial pumps, reports the following results for the year ending August 31, 2008: \(\begin{array}{lr}\text { Retained earnings, September 1, } 2007 & \$ 1,752,000 \\ \text { Net income } & 378,000 \\ \text { Cash dividends declared } & 80,000 \\ \text { Stock dividends declared } & 100,000\end{array}\) Prepare a retained earnings statement for the fiscal year ended August \(31,2008 .\)

Rolling Pin Corporation wholesales ovens and ranges to restaurants throughout the Midwest. Rolling Pin Corporation, which had 50,000 shares of common stock outstanding, declared a 3 -for-1 stock split ( 2 additional shares for each share issued). a. What will be the number of shares outstanding after the split? b. If the common stock had a market price of \(\$ 180\) per share before the stock split, what would be an approximate market price per share after the split?

Selected transactions completed by NuCraft Boating Supply Corporation during the current fiscal year are as follows: Mar. 5. Split the common stock 4 for 1 and reduced the par from \(\$ 100\) to \(\$ 25\) per share. After the split, there were 800,000 common shares outstanding. May 15. Declared semiannual dividends of \(\$ 2\) on 15,000 shares of preferred stock and \(\$ 0.12\) on the common stock to stockholders of record on June 14 , payable on July \(14 .\) July 14. Paid the cash dividends. Nov. 15. Declared semiannual dividends of \(\$ 2\) on the preferred stock and \(\$ 0.14\) on the common stock (before the stock dividend). In addition, a \(1 \%\) common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at \(\$ 30\). Dec. 15. Paid the cash dividends and issued the certificates for the common stock dividend. Journalize the transactions.

At the market close on May 12, 2006, Bank of America Corporation had a closing stock price of \(\$ 49.69\). In addition, Bank of America had earnings per share of \(\$ 4.05\) and dividend per share was \(\$ 1.95\). Determine Bank of America's dividend yield. Round to one decimal place.