Trask Corporation, a public company whose shares are traded in the over-the-counter market, had the following shareholders' equity account balances at December 31, 2016:
Common stock $7,875,000
Additional paid-in capital (including stock options) $16,050,000
Retained earnings $16,445,000
Treasury common stock $750,000
Transactions during 2017 and other information relating to the shareholders' equity accounts follow:
As of January 1, 2017, Trask had 4,000,000 authorized shares of $5 par-value common stock; it had issued 1,575,000 shares of which 75,000 were held in treasury.
On January 21, 2017, Trask issued 50,000 shares of $100 par value, 6% cumulative preferred stock at par in exchange for all of Rover Company's assets and liabilities. On that date, the net carrying amount of Rover's assets and liabilities equaled their fair values.
On January 22, 2017, Rover distributed the Trask shares to its stockholders in a complete liquidation and dissolution of Rover. Trask had 150,000 authorized shares of preferred stock.
On February 17, 2017, Trask formally retired 25,000 of 75,000 treasury common stock shares. The shares were originally issued at $15 per share and had been acquired on September 25, 2016, for $10 per share.
Trask owned 15,000 shares of Harbor Inc. common stock purchased in 2016 for $600,000. The Harbor stock shares are carried t fair value with price changes included in net income. On March 5, 2017, Trask declared a property dividend of one share of Harbor common stock for every 100 shares of Trask common stock held by a shareholder of record on April 16, 2017. Harbor stock's market price on March 5, 2017, was $60 per share. The property dividend was distributed on April 29, 2017.
On January 2, 2012, Trask granted stock options to employees to purchase 200,000 shares of the company's common stock at $12 per share, which was also the market price on that date. The options had a grant date fair value of $1.50 per share and are exercisable within a three-year period, beginning January 2, 2017. On June 1, 2017, employees exercised 150,000 options when the stock's market value was $25 per share. Trask issued new shares to settle the transaction.
On December 12, 2017, Trask declared the yearly cash dividend on preferred stock, payable on January 11, 2018, to shareholder of record on December 31, 2017.
On January 16, 2018, before the accounting records were closed for 2017, Trask learned that depreciation expense had been understated by $350,000 for the year ended December 31, 2016. The after-tax effect on 2016 net income was $245,000. The appropriate correcting entry to adjust January 1, 2017 retained earnings was recorded on the same day.
Net income for 2017 was $2,400,000.
Required:
Prepare a schedule to show how Trask's retained earnings changed from January 1, 2017, to December 31, 2017.
Prepare the shareholders' equity section of Trask's balance sheet at December 31, 2017.
Compute the book value per share of common stock at December 31, 2017
Trask Corporation, a public company whose shares are traded in the over-the-counter market, had the following shareholders' equity account balances at December 31, 2016:
Common stock $7,875,000
Additional paid-in capital (including stock options) $16,050,000
Retained earnings $16,445,000
Treasury common stock $750,000
Transactions during 2017 and other information relating to the shareholders' equity accounts follow:
As of January 1, 2017, Trask had 4,000,000 authorized shares of $5 par-value common stock; it had issued 1,575,000 shares of which 75,000 were held in treasury.
On January 21, 2017, Trask issued 50,000 shares of $100 par value, 6% cumulative preferred stock at par in exchange for all of Rover Company's assets and liabilities. On that date, the net carrying amount of Rover's assets and liabilities equaled their fair values.
On January 22, 2017, Rover distributed the Trask shares to its stockholders in a complete liquidation and dissolution of Rover. Trask had 150,000 authorized shares of preferred stock.
On February 17, 2017, Trask formally retired 25,000 of 75,000 treasury common stock shares. The shares were originally issued at $15 per share and had been acquired on September 25, 2016, for $10 per share.
Trask owned 15,000 shares of Harbor Inc. common stock purchased in 2016 for $600,000. The Harbor stock shares are carried t fair value with price changes included in net income. On March 5, 2017, Trask declared a property dividend of one share of Harbor common stock for every 100 shares of Trask common stock held by a shareholder of record on April 16, 2017. Harbor stock's market price on March 5, 2017, was $60 per share. The property dividend was distributed on April 29, 2017.
On January 2, 2012, Trask granted stock options to employees to purchase 200,000 shares of the company's common stock at $12 per share, which was also the market price on that date. The options had a grant date fair value of $1.50 per share and are exercisable within a three-year period, beginning January 2, 2017. On June 1, 2017, employees exercised 150,000 options when the stock's market value was $25 per share. Trask issued new shares to settle the transaction.
On December 12, 2017, Trask declared the yearly cash dividend on preferred stock, payable on January 11, 2018, to shareholder of record on December 31, 2017.
On January 16, 2018, before the accounting records were closed for 2017, Trask learned that depreciation expense had been understated by $350,000 for the year ended December 31, 2016. The after-tax effect on 2016 net income was $245,000. The appropriate correcting entry to adjust January 1, 2017 retained earnings was recorded on the same day.
Net income for 2017 was $2,400,000.
Required:
Prepare a schedule to show how Trask's retained earnings changed from January 1, 2017, to December 31, 2017.
Prepare the shareholders' equity section of Trask's balance sheet at December 31, 2017.
Compute the book value per share of common stock at December 31, 2017
Related questions
Oakwood Inc. is a public enterprise whose shares are traded inthe over-the-counter market. At December 31, 2015, Oakwood had6,000,000 authorized shares of $10 par value common stock, of which2,000,000 shares were issued and outstanding. The shareholders'equity accounts at December 31, 2015, had the followingbalances:
| Common stock | $20,000,000 | |
| Additional paid-in capital on common stock | 7,500,000 | |
| Retained earnings | 6,470,000 |
Transactions during 2016 and other information relating to theshareholders' equity accounts were as follows:
On January 5, 2016, Oakwood issued at $54 per share, 100,000shares of $50 par value, 9%, cumulative convertible preferredstock. Each share of preferred stock is convertible, at the optionof the holder, into 2 shares of common stock. Oakwood had 600,000authorized shares of preferred stock.
On February 2, 2016, Oakwood reacquired 20,000 shares of itscommon stock for $16 per share. Oakwood uses the cost method toaccount for treasury stock.
On April 27, 2016, Oakwood sold 500,000 shares (previouslyunissued) of $10 par value common stock to the public at $17 pershare.
On June 18, 2016, Oakwood declared a cash dividend of $1 pershare of common stock, payable on July 13, 2016, to shareholders ofrecord on July 2, 2016.
On November 9, 2016, Oakwood sold 10,000 shares of treasurystock for $21 per share.
On December 14, 2016, Oakwood declared the yearly cash dividendon preferred stock, payable on January 14, 2017, to shareholders ofrecord on December 31, 2016.
On January 18, 2017, before the books were closed for 2016,Oakwood became aware that the ending inventories at December 31,2015, were understated by $300,000 (the after-tax effect on 2015net income was $210,000). The appropriate correcting entry wasrecorded the same day.
After correcting the beginning inventory, net income for 2016was $4,500,000.
Required:
1. Prepare a statement of retained earnings for Oakwood for theyear ended December 31, 2016. Assume that only single-periodfinancial statements for 2016 are presented.
2. Prepare the shareholders' equity section of Oakwood's balancesheet at December 31, 2016.
