done Ch09-Rex
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Exercise 9-1
April 30th, Split the common stock 2 for 1.Called in the 1000000 shares of $2.5 par value capital stock outstanding. No formal journal entry is necessary.
June 1st Dr: Retained Earnings $600000
Cr. Dividends Payable $600000
July 1st Dr: Dividends Payable $600000
Cr: Cash $600000
August 1st1,000,000*5%*$19=950,000
Dr. Return Earnings 950000
Cr. Common stock distributable 125000
Paid in capital in excess of par 825000
Sept. 10th Dr. Common stock distributable 125000
Cr. Common stock 125000
Dec. 1st Dr. Return Earnings 1312500
Cr. Common stock distributable 1312500
Exercise 9-2
a. the number of shares of preferred stock issued is 60000
the number of shares of common stock issued is 100000
b. the number of shares of preferred and common stock outstanding is equal to the number of
shares they are issued: preferred stock: 60 000 , common stock: 80 000
c. The average issue price per share of the preferred stock is (2400000+600000)/60000=50
The average issue price per share of the common stock is 8
d. The total annual dividend requirement on the preferred stock is 60 000 * 40 *10% = 240 000
Exercise 9-3
A. The dividends paid to preferred:
Year 20x2, 60,000
Year 20x3 and 20x4, 50000*20*8%=80000
The dividends paid to common stock:
Year 20x2, 0
Year 20x3, 450000-80000=370000
Year 20x4, 600000-80000=520000
B. The dividends paid to preferred:
Year 20x2, 60000
Year 20x3, 80000+20000=100000
Year 20x4, 80000
The dividends paid to common:
Year 20x2,0
Year 20x3, 450000-80000-20000=350000
Year 20x4,600000-80000=520000
C. Paid to preferred common
Year 20x2 Year 20x3 Year 20x4
60 000
80 000 + 58 000 =138 000
80 000 + 88 000 = 168 000
80 000 + 232 000=312 000
80 000 + 352 000 = 432 000
Exercise 9-4
a.T
b. F
c. F
d. F
e. F
f. F
g. T
Problem9-1
a:
Mar. 1: Dr: lawsuit expense 25,000
Cr: cash 25,000 July 1: Dr: retained earnings 24,000
Cr: dividend payable 24,000 Aug.1: Dr: accumulation depreciation 12,000
Cr: retained earnings 12,000 Sep 1: Dr: dividend payable 24,000
Cr: cash 24,000
Dec 1: Dr: retained earnings 192,000
Cr: common stock distributable 80,000 Additional paid in capital 112,000 Dec 31: Dr: appropriation for contingencies 40,000
Cr: retained earnings 40,000 Dr: retained earnings 50,000
Cr: appropriation for Plant Expansion 50,000 Dec 31: Dr: net income 350,000
Cr: retained earnings 350,000
b: 500,000-24,000+12,000-192,000+40,000-50,000+350,000=636,000
c:
Problem 9-2
A: Preferred stock gives its owner certain advantages over common stockholders. These benefits include the right to receive dividends before the common stockholders and the right to receive assets before the common stocks holders if the corporation liquidates. Corporations pay a fixed amount of dividends on preferred stock.
The 7 percent cumulative term indicates the investors earn 7 percent fixed dividends.
B: 7% * 120* 20 000*3=504 000
C: If corporate issued debt, it has obligation to repay principal.
D: The date of declaration decreases the stockholders’ equity;
The date of record and the date of payment have no effect on stockholders’.
Problem 9-3
Case A: Dividends on noncumulative Preferred stock
=210000*8%=16800
Dividends on common stock=25000-16800=8200
Per share payable=8200/50000=0.164
Dr: Retained earning 25000
Cr: Dividends payable , Preferred 16800 Dividends payable , common 8200
Case B: Dividends on cumulative Preferred stock in arrears and current year:
=210000*8%*3=50400
The total amount of dividends=25000
So Dividends on cumulative Preferred stock=25000
Dr: Retained earning 25000
Cr: Dividends payable , Preferred25000 Case C: Dividends on cumulative Preferred stock in arrears and current year:
=210000*8%*3=50400
Dividends on common stock=75000-50400=24600
Per share payable=24600/50000=0.492
Dr: Retained earning 75000
Cr: Dividends payable , Preferred 50400 Dividends payable , common 24600。
