Exam 13: Equity Financing

The data below are from the December 31, 2011, balance sheet of the Handi Corner Corporation: During 2012, the following transactions affecting corporate capital were recorded: Assuming the cost method is used for treasury stock and that retained earnings are to be reduced minimally in stock reacquisition transactions, provide the entries required to record the above transactions.

Farnon Company has not declared or paid dividends on its cumulative preferred stock in the last three years. These dividends should be reported

During 2011, the following transactions related to the capital stock of the Buffet-Line Corp. occurred: Provide the entries to record the above transactions.

When a portion of stockholders' original investment is returned in the form of a dividend, it is called a

On December 10, Daniel Co. split its stock 5-for-2 when the market value was $65 per share. Prior to the split, Daniel had 200,000 shares of $15 par value stock. After the split, the par value of the stock was

Beldon Co. was organized on January 2, 2011, with the following capital structure: Beldon's net income for the year ended December 31, 2011, was $900,000, but no dividends were declared. Beldon's balance sheet would report Dividends Payable at December 31, 2011, of

On January 1, 2011, the records of the Gerrard Corporation showed these balances: During 2011 and 2012, these transactions occurred: Provide the entries to record the declaration and payment of the stock dividends during 2011 and 2012.

Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements: An Amendment of ARB No. 51", requires that the amount of equity interest provided by outside shareholders of subsidiaries that are not 100 %-owned by the parent company requires this amount be shown as

A restriction of retained earnings is most likely to be required by

Cox Corporation was organized on January 1, 2010, at which date it issued 100,000 shares of $10 par common stock at $15 per share. During the period January 1, 2010, through December 31, 2012, Cox reported net income of $450,000 and paid cash dividends of $230,000. On January 10, 2012, Cox purchased 6,000 shares of its common stock at $12 per share. On December 31, 2012, Cox sold 4,000 treasury shares at $8 per share. Cox uses the cost method of accounting for treasury shares. What is Cox's total stockholders' equity on December 31, 2012?

In 2011, Wyatt Corporation issued for $110 per share, 15,000 shares of $100 par value convertible preferred stock. One share of preferred stock may be converted into three shares of Wyatt's $25 par value common stock at the option of the preferred shareholder. On December 31, 2012, all of the preferred stock was converted into common stock. The market value of the common stock at the conversion date was $40 per share. What amount should be credited to the common stock account on December 31, 2012?

On January 1, 2010, Bartley Company initiated a stock incentive plan for many employees. The plan provides for each qualified executive to receive options for 2,000 shares of common stock. The option is exercisable at any time after four years and prior to expiration, which is five years from the date of grant. Employment with the company is required through the exercise date. The options are not transferable and the specified exercise price is set equal to the grant date market price of the stock. Compensation cost is to be assigned equally to each year from the grant date to the first exercise (vesting) date, which is four years. The company uses SFAS No. 123R to account for stock-based compensation plans. On January 1, 2013, 1,000 employees were each granted options to acquire 2,000 shares under the plan when the market price of the stock was $30. Management expects a forfeiture rate of approximately 4 percent per year over the service period. Application of an option pricing model results in a fair value of each option at the grant date of $12 per option. At December 31, 2013, 840 grantees are still employed by the company and will vest with 2,000 options each. All vested options are exercised on December 28, 2014, prior to their expiration on December 31, 2014. The market price of the stock on December 28, 2014, was $50 per share. Required: Prepare all entries necessary to account for this stock option plan. Assume that all compensation expense is expensed in each period rather than being held back as part of inventory cost.

The following data are extracted from the stockholders' equity section of the balance sheet of Guthrie Corporation: During 2011, the corporation declared and paid cash dividends of $7,500 and also declared and issued a stock dividend. There were no other changes in stock issued and outstanding during 2011. Net income for 2011 was

The following amounts were taken from the income statement of LFM Company for the year ending December 31, 2011: Income from discontinued operations: In addition, LFM reported the following items (all items are before taxes): The tax rate on all items is 40%. Prepare a statement of comprehensive income in a one-statement format.

A company issued rights to its existing shareholders to acquire, at $15 per share, 5,000 unissued shares of common stock with a par value of $10 per share. Common Stock will be credited at

On June 30, 2011, O'Hara Co. declared and issued a 10 percent stock dividend. Prior to this dividend, O'Hara had 60,000 shares of $10 par value common stock issued and outstanding. The market value of O'Hara Co.'s common stock on June 30, 2011, was $24 per share. As a result of this stock dividend, by what amount would O'Hara's total stockholders' equity increase (decrease)?

On July 23, Trimble Company declared a cash dividend totaling $80,000. Stockholders were notified that $15,000 of this dividend represented a liquidating dividend. At the time, the balance in Paid-In Capital in Excess of Par was $113,000. Make the journal entries to record (1) the declaration and (2) the payment of this dividend.

Which of the following is an appropriate presentation of treasury stock?

On December 31, 2011, the stockholders' equity section of Addyson Co. was as follows: On March 31, 2012, Addyson declared a 10 percent stock dividend, and accordingly 1,800 additional shares were issued, when the fair market value of the stock was $16 per share. For the three months ended March 31, 2012, Addyson sustained a net loss of $64,000. The balance of Addyson's Retained Earnings as of March 31, 2012, should be

Which of the following features of preferred stock would most likely be opposed by common shareholders?