Question;COMPREHENSIVE EXAMINATION D;PART 4;Approximate;Problem Topic Time;D-I Treasury Stock. 20;min.;D-II *Cash Dividends. 10;min.;D-III Stock Dividends and Stock;Splits. 10;min.;D-IV Earnings Per Share Concepts. 10;min.;D-V Earnings Per Share;Computations. 10;min.;D-VI Basic and Diluted Earnings Per;Share. 20;min.;D-VII Available-for-Sale Equity;Securities. 15;min.;D-VIII Trading Securities. 30 min.;125 min.;*Part of this;topic is dealt with in an Appendix to the chapter.;Problem D-I ? Treasury Stock;The stockholders' equity section of Carey Co.'s balance;sheet at December 31, 2012, was as follows;Common;stock--$10 par (authorized 1,000,000 shares;issued;and outstanding 600,000 shares) $ 6,000,000;Paid-in;capital in excess of par 1,500,000;Retained;earnings 3,250,000;$10,750,000;Instructions;Prepare journal entries (1, 2, and 4) and show;proper disclosure (3) to reflect the following treasury stock transactions;showing how each is accounted for under the cost method. (Show computations.);1. On January 4, 2013, having idle cash, Carey;Co. repurchased 20,000 shares of its out-standing stock for $500,000.;2. On March 4, Carey sold 5,000 of these;reacquired shares at $28 per share.;3. Show the proper disclosures in the;stockholders' equity section of the balance sheet issued at the end of the;first quarter, March 31, 2013. Assume net income of $100,000 during the first;quarter.;4. On June 30, 2013 the firm sold 10,000 of the;reacquired shares for $21 per share.;*Problem D-II ? Cash Dividends;Bell Company has stock outstanding as follows: Common;$10 par value per share, 140,000 shares, Preferred, 5%, $100 par value per;share, 8,000 shares. The Preferred is cumulative and participating up to an;additional 4% of par, two years are in arrears (not including the current;year), and the total amount of cash dividends declared for both classes of;stock is $230,000.;Instructions;Prepare the entry for the dividend declaration;separating the dividend into the common and preferred portions.;Problem D-III ? Stock Dividends and Stock Splits;Stock dividends and stock splits are common forms;of corporate stock distribution to stockholders.;Consider each;of the numbered statements. You are to decide whether it;A. Applies to both stock dividends;and stock splits.;B. Applies to neither.;C. Applies to stock splits only.;D. Applies to stock dividends only.;E. Applies to stock splits;effected in the form of a dividend only.;F. Applies to both stock splits effected;in the form of a dividend and a stock dividend.;(In each;instance, the issuing company has only one class of stock.);Instructions;Print next to the number of each statement below;the single capital letter of the description which applies to the statement.;Statements;1. The;distribution is a multiple as contrasted to a fraction of the number of shares;previously outstanding.;2. The;total number of shares outstanding is increased.;3. The;individual stockholder's share of net assets is increased.;4. There;is no transfer between retained earnings and capital stock accounts, other than;to the extent occasioned by legal requirements.;5. There;is no change in the total stockholders' equity of the issuing corporation.;6. The;retained earnings available for dividends are increased.;7. Retained;earnings in the amount of the distribution are transferred to capital stock, in;some instances in an amount in excess of that required by the laws of the state;of incorporation.;8. Subsequent;per-share earnings, if any, are decreased.;9. The;par (or stated value) of the stock is unchanged.;Problem D-IV ? Earnings Per Share Concepts;Indicate which of the following securities would;be included in the computation of "basic earnings per share," and;which would be included in the computation of "diluted earnings per;share." Place a "B" before those which affect only basic EPS, a;D" before those which affect only diluted EPS, a "BD;before those which affect both basic and diluted EPS, and an "N;before those securities which do not affect EPS computations. Assume that;where applicable, the appropriate securities are dilutive.;1. Warrants;to purchase additional common shares.;2. Common;stock.;3. Nonconvertible;debenture bonds.;4. Convertible;noncumulative preferred stock.;5. Cumulative;nonconvertible preferred stock.;6. Convertible;bonds.;7. Executive;stock options.;8. Notes;payable.;Problem D-V ? Earnings Per Share Computations;Jones, Inc. has net income (30% tax rate) of $1,200,000;for 2013, and an average number of shares outstanding during the year of;500,000 shares. The corporation issued $2,000,000 par value of 10-year, 9% convertible;bonds on January 1, 2011 at a $180,000 discount. The convertible bonds are convertible;into 70,000 shares of common stock. Assume the company uses the straight-line;method for amortizing bond discount.;Instructions;Compute the;earnings per share data, excluding any notes if required.;Problem D-VI ? Basic and Diluted Earnings Per;Share;Assume that;the following data relate to Rosen, Inc. for the year 2013;Net;income (30% tax rate) $3,000,000;Average;common shares outstanding 2013 1,000,000 shares;10%;cumulative convertible preferred stock;Convertible;into 80,000 shares of common $1,600,000;8%;convertible bonds, convertible into 75,000;shares;of common $2,500,000;Stock;options;Exercisable;at the option price of $25 per share;average;market price in 2013, $30 84,000 shares;Instructions;Compute (a);basic earnings per share, and (b) diluted earnings per share.;Problem D-VII ?Available-for-Sale Equity Investments;On January 2, 2012, Norwin Company purchased;1,000 shares of Oslo Company common stock for $30,000. The stock has a par;value of $10 and is part of the total stock outstanding of 20,000 shares of Oslo;Company. Norwin Company intends the stock to be available for sale. Total;stockholders' equity of Oslo Company on January 2, 2012 was $600,000.;Instructions;Prepare necessary journal entries on the books of;Norwin Company for the following transactions. If no entry is required, write;none" in the space provided. (Round all calculations to the nearest;cent.);(a) January;2, 2012: Norwin purchases the shares described above.;(b) December;31, 2012: Norwin receives a $.75 per share dividend from Oslo, and Oslo;announces a net income for 2012 of $250,000.;(c) December;31, 2012: According to The Wall Street;Journal, Oslo common is selling for $27 per share. Norwin's management;views this decline as being only temporary in nature. Oslo's common is Norwin's only;available-for-sale security.;(d) February;15, 2013: Norwin sells 500 of the shares purchased on January 2, 2012 at $32 per;share.;Problem D-VIII ? Trading Securities;The;information below relates to Milton Company's trading securities in 2012 and 2013.;(a) Prepare the journal entries for the;following transactions.;January;1, 2012 Purchased $300,000 par;value of GLF Company bonds at 97 plus accrued interest. The bonds pay interest;annually at 9% each December 31. Broker's commission was $3,000.;September;1, 2012 Sold $150,000 par value of GLF;Company bonds at 94 plus accrued interest. Broker's commission, taxes, and fees;were $1,500.;September;5, 2012 Purchased 5,000 shares of Hayes;Inc. common stock for $30 per share. The broker's commission on the purchase;amounted to $2,000.;December;31, 2012 Make the appropriate entry for;the GLF Company bonds.;December;31, 2012 The market prices of the;trading securities at December 31 were: Hayes, Inc. common stock, $31 per;share, and GLF Company bonds, 99. Make the appropriate entry.;July;1, 2013 Milton sold 1/2 of;the Hayes, Inc. common stock at $32 per share. Broker's commissions, taxes, and;fees were $1,000.;December;1, 2013 Milton purchased 600 shares of;Ramirez, Inc. common stock at $45 per share. Broker's commission was $500.;December;31, 2013 Make the appropriate entry for;the GLF Company bonds.;December;31, 2013 The market prices of the;trading securities at December 31 were: Hayes, Inc. common stock, $34 per;share, GLF Company bonds, 98, and Ramirez, Inc. common stock, $47 per share. Make;the appropriate entry.;(b) Present the financial statement disclosure;(balance sheet and income statement) of Milton Company's transactions in;trading securities for each of the;years 2012 and 2013. Appropriate financial statement subheadings must be;disclosed.
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