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COMPREHENSIVE EXAMINATION D

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COMPREHENSIVE EXAMINATION D

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.

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[Solved] COMPREHENSIVE EXAMINATION D

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COMPREHENSIVE EXAMINATION D 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 inc...
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