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Assignment 6

This document contains 8 questions regarding accounting for corporations. Question 1 asks for a journal entry to record treasury stock purchase. Question 2 calculates preferred shareholder dividend distribution. Question 3 identifies a stock split ratio. Question 4 calculates earnings per share. Questions 5-7 require journal entries for stock dividends, splits, and cash dividend declarations and payments. Question 8 requires preparation of a retained earnings statement.

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54 views

Assignment 6

This document contains 8 questions regarding accounting for corporations. Question 1 asks for a journal entry to record treasury stock purchase. Question 2 calculates preferred shareholder dividend distribution. Question 3 identifies a stock split ratio. Question 4 calculates earnings per share. Questions 5-7 require journal entries for stock dividends, splits, and cash dividend declarations and payments. Question 8 requires preparation of a retained earnings statement.

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blabla
Copyright
© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
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Assignment: Accounting for corporations

Time allowed 1 hour 30 minutes

Question 1- ABCD purchased 5000 shares of its own common stock at $40 per share, the par value
of its common stock is $1. Prepare journal entry to record this transaction.

Treasury stock 200,000

Cash 200,000

Question 2- A company has 20,000, $5 par ordinary shares and 5000 shares of 6%, $10 par non-
cumulative preferred stock. In 2010 the company declared and paid a dividend of 2000. In 2011 it
declared and paid dividends of $6000. How much of the 2011 dividend was distributed to preferred
shareholders?

3000= 0.06*5000*10

Question 3- Zest Inc had 200,000 shares of common stock outstanding before a stock split occurred,
and 400,000 shares outstanding after the stock split. What was the stock split?

2 for 1

Question 4- Calculate the earnings per share for 2010 of East Inc if the company had a net income of
$400,000, 200,000 common stock outstanding, and dividends declared and paid during 2010 were
$80,000 on the preferred stock and 120,000 on the common stock.

1.6= (400,000-80,000)/200,000

Question 5- Abbott Corporation splits its common stock 4 for 1, when the market value is $40 per
share. Prior to the split, Abbott had 50,000 shares of $10 par value common stock issued and
outstanding. What is the par value of the stock after the split?

Value reduced to $2.50 per share.

Question 6- The following information is for ABC Company for year 2019

Common stock ($5 par value) $2000, 000

Retained earnings $300,000

It declared and paid a 10% stock dividend when the market value was $10 per share.

Calculate the followings after the stock dividend was paid: Total shareholders’ equity, number of
shares outstanding and book value per share.

a) 2000,000+300,000=2300,000

b) (2000,000/5)*110%= 440,000
c) 2300,000/440,000=5.2

Question 7- The stockholders' equity section of Ellis Corporation at December 31, 2007, included the
following:

6% preferred stock, $100 par value, cumulative,

10,000 shares authorized, 8,000 shares issued and outstanding....... $ 800,000

Common stock, $10 par value, 250,000 shares authorized,

200,000 shares issued and outstanding............................................ $2,000,000

Dividends were not declared on the preferred stock in 2007 and are in arrears.

On September 15, 2008, the board of directors of Ellis Corporation declared dividends on the
preferred stock for 2007 and 2008, to stockholders of record on October 1, 2008, payable on
October 15, 2008.

On November 1, 2008, the board of directors declared a $.90 per share dividend on the common
stock, payable November 30, 2008, to stockholders of record on November 15, 2008.

Instructions

Prepare the journal entries that should be made by Ellis Corporation on the dates indicated below:

September 15, 2008 November 1, 2008

October 1, 2008 November 15, 2008

October 15, 2008 November 30, 2008

Question 8- On January 1, 2008, Windom Corporation had Retained Earnings of $378,000. During
the year,
Windom had the following selected transactions:

1. Declared stock dividends of $40,000.

2. Declared cash dividends of $90,000.

3. A 2 for 1 stock split involving the issuance of 200,000 shares of $5 par value common stock for
100,000 shares of $10 par value common stock.

4. Suffered a net loss of $70,000.

5. Corrected understatement of 2007 net income because of an inventory error of $68,000.

Instructions

Prepare a retained earnings statement for the year.

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