Faith evans corporation is a regional company

Brief Exercise 15-4

Ravonette Corporation issued 375 shares of $15 par value common stock and 110 shares of $48 par value preferred stock for a lump sum of $20,025. The common stock has a market price of $30 per share, and the preferred stock has a market price of $100 per share. Prepare the journal entry to record the issuance. (Round answers to 0 decimal places, e.g., 1520. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

http://edugen.wiley.com/edugen/art2/common/pixel.gifCash

http://edugen.wiley.com/edugen/art2/common/pixel.gif20025

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http://edugen.wiley.com/edugen/art2/common/pixel.gifPreferred Stock

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http://edugen.wiley.com/edugen/art2/common/pixel.gifPaid-in Capital in Excess of Par - Preferred Stock

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http://edugen.wiley.com/edugen/art2/common/pixel.gifCommon Stock

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http://edugen.wiley.com/edugen/art2/common/pixel.gifPaid-in Capital in Excess of Par - Common Stock

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Exercise 15-12

Lotoya Davis Corporation has 10.12 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 62 cents per share cash dividend to stockholders of record as of June 14, payable June 30. (a) Prepare the journal entry for each of the dates above assuming the dividend represents a distribution of earnings. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

6/1

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6/14

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6/30

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(b) How would the entry differ if the dividend were a liquidating dividend? (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

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Warning

Exercise 15-19
Shown below is the liabilities and stockholders’ equity section of the balance sheet for Jana Kingston Company and Mary Ann Benson Company. Each has assets totaling $4,418,100.

Jana Kingston Co.

Mary Ann Benson Co.

Current liabilities

$315,600

Current liabilities

$754,600

Long-term debt, 10%

1,281,000

Common stock ($20 par)

2,945,000

Common stock ($20 par)

2,103,000

Retained earnings (Cash dividends, $328,900)

718,500

Retained earnings (Cash dividends, $227,700)

718,500

$4,418,100

$4,418,100

For the year, each company has earned the same income before interest and taxes.

Jana Kingston Co.

Mary Ann Benson Co.

Income before interest and taxes

$1,203,000

$1,203,000

Interest expense

128,100

0

1,074,900

1,203,000

Income taxes (45%)

483,705

541,350

Net income

$591,195

$661,650

At year end, the market price of Kingston’s stock was $101 per share, and Benson’s was $63.50. Assume balance sheet amounts are representative for the entire year. (a) Calculate the return on total assets? (Round answers to 2 decimal places, e.g. 16.85%.)

Return on total assets

Kingston Company

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%

Benson Company

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%

Which company is more profitable in terms of return on total assets? http://edugen.wiley.com/edugen/art2/common/pixel.gif (b) Calculate the return on common stock equity? (Round answers to 2 decimal places, e.g. 16.85%.)

Return on common stock equity

Kingston Company

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%

Benson Company

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%

Which company is more profitable in terms of return on common stock equity? http://edugen.wiley.com/edugen/art2/common/pixel.gif (c) Calculate the Net income per share. (Round answers to 2 decimal places, e.g. $6.85.)

Net income per share

Kingston Company

$http://edugen.wiley.com/edugen/art2/common/pixel.gif

Benson Company

$http://edugen.wiley.com/edugen/art2/common/pixel.gif

Which company has the greater net income per share of stock? Neither company issued or reacquired shares during the year. http://edugen.wiley.com/edugen/art2/common/pixel.gif (d1) From the point of view of net income, is it advantageous to the stockholders of Jana Kingston Co. to have the long-term debt outstanding? http://edugen.wiley.com/edugen/art2/common/pixel.gif (e) What is the book value per share for each company? (Round answers to 2 decimal places, e.g. $6.85.)

Book value per share

Kingston Company

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Benson Company

$http://edugen.wiley.com/edugen/art2/common/pixel.gif

Ok

Cancel

Problem 15-3

Hatch Company has two classes of capital stock outstanding: 8%, $20 par preferred and $5 par common. At December 31, 2014, the following accounts were included in stockholders’ equity.

Preferred Stock, 155,900 shares

$ 3,118,000

Common Stock, 2,023,000 shares

10,115,000

Paid-in Capital in Excess of Par—Preferred Stock

204,300

Paid-in Capital in Excess of Par—Common Stock

28,050,000

Retained Earnings

4,507,000

The following transactions affected stockholders’ equity during 2015.

Jan. 1

31,500 shares of preferred stock issued at $23 per share.

Feb. 1

59,400 shares of common stock issued at $21 per share.

June 1

2-for-1 stock split (par value reduced to $2.50).

July 1

37,000 shares of common treasury stock purchased at $9 per share. Hatch uses the cost method.

Sept. 15

10,000 shares of treasury stock reissued at $10 per share.

Dec. 31

The preferred dividend is declared, and a common dividend of 50¢ per share is declared.

Dec. 31

Net income is $2,292,000.

Prepare the stockholders’ equity section for Hatch Company at December 31, 2015. (Enter account name only and do not provide descriptive information.)

HATCH COMPANY Stockholders’ Equity December 31, 2015

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http://edugen.wiley.com/edugen/art2/common/pixel.gifPreferred Stock

$http://edugen.wiley.com/edugen/art2/common/pixel.gif

http://edugen.wiley.com/edugen/art2/common/pixel.gifCommon Stock

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http://edugen.wiley.com/edugen/art2/common/pixel.gifEAT_1363776507149_0_503989536147669_049

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http://edugen.wiley.com/edugen/art2/common/pixel.gifEAT_1363776507149_0_503989536147669_066

http://edugen.wiley.com/edugen/art2/common/pixel.gifPaid-in Capital in Excess of Par - Preferred Stock

$http://edugen.wiley.com/edugen/art2/common/pixel.gif

http://edugen.wiley.com/edugen/art2/common/pixel.gifPaid-in Capital in Excess of Par - Common Stock

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http://edugen.wiley.com/edugen/art2/common/pixel.gifTreasury Stock

http://edugen.wiley.com/edugen/art2/common/pixel.gif

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http://edugen.wiley.com/edugen/art2/common/pixel.gifEAT_1363776507149_0_503989536147669_128

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http://edugen.wiley.com/edugen/art2/common/pixel.gifRetained Earnings

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http://edugen.wiley.com/edugen/art2/common/pixel.gifEAT_1363776507149_0_503989536147669_162

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http://edugen.wiley.com/edugen/art2/common/pixel.gifEAT_1363776507149_0_503989536147669_170: http://edugen.wiley.com/edugen/art2/common/pixel.gif Treasury Stock

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http://edugen.wiley.com/edugen/art2/common/pixel.gifEAT_1363776507149_0_503989536147669_201

$http://edugen.wiley.com/edugen/art2/common/pixel.gif

Warning

Ok

Cancel

Exercise 15-4

Faith Evans Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ. Faith Evans Corp. has issued 10,370 units. Each unit consists of a $519 par, 12% subordinated debenture and 10 shares of $5 par common stock. The investment banker has retained 415 units as the underwriting fee. The other 9,955 units were sold to outside investors for cash at $913 per unit. Prior to this sale, the 2-week ask price of common stock was $41 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value. (a) Prepare the journal entry to record Evans’ transaction, under the following conditions. (Round answers to 0 decimal places, e.g. $38,487. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(1)

Employing the incremental method.

(2)

Employing the proportional method, assuming the recent price quote on the common stock reflects fair value.

No.

Account Titles and Explanation

Debit

Credit

1.

http://edugen.wiley.com/edugen/art2/common/pixel.gifUnamortized Bond Issue Costs

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http://edugen.wiley.com/edugen/art2/common/pixel.gifCash

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http://edugen.wiley.com/edugen/art2/common/pixel.gifBonds Payable

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http://edugen.wiley.com/edugen/art2/common/pixel.gifCommon Stock

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http://edugen.wiley.com/edugen/art2/common/pixel.gifPaid-in Capital in Excess of Par - Preferred Stock

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2.

http://edugen.wiley.com/edugen/art2/common/pixel.gifCash

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http://edugen.wiley.com/edugen/art2/common/pixel.gifUnamortized Bond Issue Costs

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http://edugen.wiley.com/edugen/art2/common/pixel.gifDiscount on Bonds Payable

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http://edugen.wiley.com/edugen/art2/common/pixel.gifBonds Payable

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http://edugen.wiley.com/edugen/art2/common/pixel.gifCommon Stock

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http://edugen.wiley.com/edugen/art2/common/pixel.gifPaid-in Capital in Excess of Par - Common Stock

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Warning