Question 1

Explain how to compute book value per common share and discuss how it can be used to analyze the financial condition of a corporation.

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Question 2

The stockholders' equity section of a company's year-end balance sheet follows:
109
 $\begin{array}{l|l|l}
\text { Preferred stock, } \$ 50 \text { par value, } 9 \% \text { cumulative and } & \$ 500,000 \
\text { nonparticipating, } 10,000 \text { shares outstanding } & \
\hline \text { Paid-in capital in excess of par value, preferred stock } & \underline{50,000}\
\hline\text { Total capital paid-in by preferred stockholders }&&\$550,000
\end{array}$
 $\begin{array}{l|l|l}
\text { Preferred stock, } \$ 50 \text { par value, } 9 \% \text { cumulative and } & \$ 500,000 \
\text { nonparticipating, } 10,000 \text { shares outstanding } & \
\hline \text { Paid-in capital in excess of par value, preferred stock } & \underline{50,000}\
\hline\text { Total capital paid-in by preferred stockholders }&&\$550,000
\end{array}$

$\begin{array}{|l|l|l|}
\hline\text { Total capital paid-in by preferred stockholders } &&\$550,000 \
\hline \text { Common stock, } \$ 0.50 \text { par value, } 1,500,000 \text { shares } & \$ 750,000 \
\text { outstanding }\ 
\hline \text { Paid-in capital in excess of par value, common stock }&150,000\ 
\hline \text { Total capital paid-in by common stockholders } && 900,000 \
\hline \text { Total paid-in capital } && \$ 1,450,000 \
\hline \text { Retained earnings } && 1,690,000 \
\hline \text {Total stockholders' equity}&&\$ 3,140,000\
\hline
\end{array}$ The preferred stock has a call price of $51.50 per share plus dividends in arrears. Only one year of dividends is in arrears. Calculate the book value per (1) preferred share, and (2) common share.

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Question 3

What is treasury stock? What reasons might a company hold treasury stock?

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Question 4

A corporation had the following stock outstanding when the company's board of directors declared a
$75,000 cash dividend in the current year:
 $$\begin{array} { l | l } 
\text { Preferred stock, \$40 par, 6\%, 12,500 shares issued } & \$ 500,000 \
\hline \text { Common stock, \$10 par, 70,000 shares issued } \ldots \ldots \ldots \ldots \ldots & 700,000 \
\hline \text { Total } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & \$ 1,200,000 \
\hline
\end{array}$$ Allocate the cash dividend between the preferred and common stockholders assuming the preferred stock is noncumulative and nonparticipating.

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Question 5

A company is authorized to issue 750,000 shares of $2 par value common stock. Prepare journal entries to record the following selected transactions that occurred during the company's first year of operations:
Jan. 10 Sold 102,000 shares of common stock for $8 cash per share.
15 Exchanged 10,000 shares of common stock for equipment with a market value of $70,000.
Feb. 1 Exchanged 500 shares of common stock for $3,000 of legal services incurred during the company's organization.

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Question 6

Rhoads Corporation is authorized to issue 250,000 shares of $50 par, 10%, noncumulative, nonparticipating preferred stock and 5,000,000 shares of no-par common stock. Prepare journal entries to record the following selected transactions that occurred during this year:
Feb. 1 Issued 10,000 shares of common stock for $30 cash per share.
15 Exchanged 2,000 shares of preferred stock for equipment and merchandise inventory with market values of $80,000 and $30,000, respectively.

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Question 7

The stockholders' equity section of a corporation's balance sheet follows:
 (1) Assuming that no dividends are in arrears, compute the book values per preferred share and per common share.
(2) Assuming that one year of cumulative preferred dividends is in arrears, compute the book values per preferred share and per common share.

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Question 8

Given the following information about a corporation's current year activities, compute the retained earnings for the current year.
 $$\begin{array} { l | l } 
\text { Retained earnings, January 1 } & \$ 342,000 \
\hline \text { Cash dividends } & \$ 51,700 \
\hline \text { Stock dividends } & \$ 40,000 \
\hline \text { Net income } & \$ 141,000
\end{array}$$

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Question 9

Shaw Corporation reported stockholders' equity on December 31 of the prior year as follows:
 $$\begin{array} { l | l } 
\text { Common stock, \$5 par value, } 1,000,000 \text { shares } & \$ 2,500,000 \
\text { authorzed, 500,000 shares istued ...... } & \
\hline \text { Paid-in capital in excess of par, common stock } \ldots & 1,000,000 \
\hline \text { Retained earnings } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 3,000,000
\end{array}$$ The following selected transactions occurred during the current year:
Feb. 15 The board of directors declared a 5% stock dividend to stockholders of record on March 1, payable March 20. The stock was selling for $8 per share.
Mar. 9 Distributed the stock dividend.
May 1 A cash dividend of $0.30 per share was declared by the board of directors to stockholders of record on May 20, payable June 1.
June 1 Paid the cash dividend.
Aug. 20 The board decided to split the stock 4-for-1, effective on September 1. Sept. 1 Stock split 4-for-1.
Dec. 31 Earned a net income of $800,000 for the current year.
Prepare a statement of retained earnings as of December 31 of the current year.

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Question 10

A corporation reports the following year-end stockholders' equity: $\text { Paid-in capital: }$
$\begin{array}{|l|c|}
\hline \begin{array}{l}
\text { Preferred stock, 8\%, 100,000 shares } \
\text { authorized, 50,000 shares issued }
\end{array} & \$ 2,500,000 \
\hline \text { Paid-in capital in excess of par, Preferred} & 125,000 \
\hline \begin{array}{l}
\text { Common stock, } \$ 1 \text { par, } 5,000,000 \text { shares } \
\text { authorized, } 4,000,000 \text { shares issued  }
\end{array} & 4,000,000 \
\hline \text { Paid-in capital in excess of par, Common } & 1,200,000 \
\hline \text { Total paid-in capital } & \$ 7,825,000 \
\hline \text { Retained earnings} & 10,675,000 \
\hline\text { Total stockholders' equity }&\$18,500,000\
\hline
\end{array}$
 
Determine the following:
(1)Par value for the preferred stock.
(2)	Book value per share for both preferred stock and common stock assuming no dividends in arrears.

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Question 11

Explain the difference between a large stock dividend and a small stock dividend. In addition, explain how to record these two types of stock dividends.

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Question 12

A corporation had the following stock outstanding when the company's board of directors declared a
$55,000 cash dividend during the current year:

Allocate the cash dividend between the preferred and common stockholders assuming the preferred stock is cumulative and nonparticipating and dividends are one year in arrears.

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Question 13

On September 20, Fletcher Corporation issued 25,000 shares of no-par common stock for equipment having a market value of $85,000. Prepare the general journal entry to record this transaction.

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Question 14

A corporation received its charter and began business this year. The company is authorized to issue 500,000 shares of $100 par, 6%, noncumulative, nonparticipating preferred stock, and 1,000,000 shares of no-par common stock. The following selected transactions occurred during this year:
Mar. 5 Issued 250 shares of preferred stock for $102 cash per share.
July 15 Exchanged 750 shares of common stock for $12,000 in legal services incurred in the organization of the company.
Prepare journal entries to record these transactions.

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Question 15

What is a stock split? How is a stock split different from a stock dividend?

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Question 16

Boron Company is authorized to issue 50,000 shares of $50 par value, 8%, cumulative, fully participating preferred stock, and 750,000 shares of $5 par value common stock. Prepare journal entries to record the following selected transactions that occurred during the company's first year of operations:

May 5 Exchanged 2,200 shares of preferred stock for a building with a market value of $135,000.
July 20 Sold 1,550 shares of preferred stock for $50 cash per share. 
Dec. 20 Sold 1,000 shares of preferred stock at $52 cash per share.

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Question 17

A company was organized in January 2016 and has 20,000 shares of $10 par value, 10%, nonparticipating preferred stock outstanding and 150,000 shares of $2 par value common stock outstanding. It has declared and paid cash dividends each year as shown below. Calculate the total dividends distributed to each class of stockholder under each of the assumptions given.

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Question 18

Avro Corporation has $875,000 in stockholders' equity and 350,000 weighted-average shares of common stock outstanding. Calculate the book value per common share.

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Question 19

On July 1, a corporation issued 15,000 shares of no-par common stock with a stated value of $3 per share in exchange for a tract of land having a market value of $215,000. Prepare the general journal entry to record this transaction.

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Question 20

Given the following information about a corporation's current year activities, compute the retained earnings for the current year. 
$\begin{array} { l l } 
\text { Retained earnings, December } 31 \text { (prior year) } & \$ 280,000 \
\text { Cost of goods sold } & \$ 90,000 \
\text { Other operating expenses } & \$ 54,000 \
\text { Cash dividends } & \$ 31,800 \
\text { Correction of understatement of net income in prior } & \
\text { period (inventory error) } & \$ 23,000 \
\text { Stock dividends } & \$ 20,000 \
\text { Net income } & \$ 36,000
\end{array}$

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