Finding Amounts Missing from the Stockholders Equity Section 2013

| June 9, 2016


Homework #3 (due on Wednesday, 6/24/15 in class)

Question 1

Finding Amounts Missing from the Stockholders’ Equity Section


Shareholders’ equity:

Preferred stock, $100 Par


Paid-in Capital in Excess of Par – Preferred Stock


Common stock; authorized 2,000,000 shares; ? issued; 120,800 shares



Additional paid-in-capital (includes $210,000 from treasury stock transactions)


Retained earnings


Accumulated other comprehensive loss


Treasury stock (44,400 Common stock shares in 2013), at cost



The number of shares of common stock issued?


The par value of common stock is?


The average sale price of the common stock when issued was $

per share.

4. Have the treasury stock transactions increased stockholders’ equity or decreased stockholders’ equity? By how much?

5. How much did the treasury stock held cost per share?

6. What is the total stockholders’ equity?

7. How many preferred stocks were issued?

8. What is the average price of the preferred stock issued?

9. Assume that the preferred stock was originally discounted at 10% by the market. What are the dividends that are promised by the preferred stock?

Question 2

Recording Treasury Stock Transactions and Analyzing Their Impact

May 25: Purchased in the market 400 shares of the company’s own common stock at $35 per share. Par value for the common stock was $1 per share.
July 20: Sold 60 shares of treasury stock for $45 cash per share.
Nov 11: Sold 40 shares of treasury stock for $10 cash per share.

Give the journal entries for each of these transactions
Describe the impact, if any, that these transactions have on the income statement

Question 3

Comparing Stock Dividends and Splits

On August 1, 2014, 2E Corporation had the following capital structure:

Common stock (par $5)


Capital in excess of par


Retained Earnings


Treasury stock



Complete the following comparative tabulation based on two independent cases:

Case 1:

The board of directors declared and issued a 10 percent stock dividend when the stock was selling at $20 per share.

Case 2:

The board of directors voted a 5-to-1 stock split (i.e., a 500 percent increase in the number of shares). The market price prior to the split was $20 per share.

Before Dividend

After stock


and stock split


After stock split

Common Stock Account

Par per share

Shares outstanding

Capital in excess of par

Retained earnings

Total stockholders’ equity

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