ADMS 3595 Study Guide - Authorised Capital, Retained Earnings, Share Capital

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Published on 14 Apr 2013
School
York University
Department
Administrative Studies
Course
ADMS 3595
Professor
ADMS 3595, Intermediate Accounting II
Winter 2012
EXAM II (KEY)
Blue Version
I. MC Answer (30 @ 2 = 60 points)
1.(b) 2.(d) 3.(a) 4.(b) 5.(c) 6.(c) 7.(b) 8.(d) 9.(c) 10.(a)
11.(c) 12.(a)13.(b)14.(d)15.(b)16.(c)17.(d)18.(a)19.(a) 20.(c)
21.(b) 22.(c)23.(a)24.(d)25.(a)26.(c)27.(a)28.(b)29.(b) 30.(b)
5. c
×+
12
3
100,000 400,000
$510,000
= $1.20
6. c
225,000
12
3
100,000 500,000
.7) .06 0($5,000,00 $1,500,000
+
×+
××+
= $2.28.
9. c
500,000 800,000
$1,700,000
+
= $1.31. if converted method assumes that pref shares are
converted to common so no pref dividends subtracted from net income
10. a. 6,000,000 + (1,000,000 × 9/12) + (500,000 × 6/12) = 7,000,000 (BEPS).
7,000,000 calc above + (25,000 × 20 × 3/12) = 7,125,000 (DEPS).
12. a max[-1,000, 0] = $0.
13. b Option Premium = Intrinsic Value ($0) + Time Value = $500.
14. d $4,200 fair value less $500 recorded cost = $3,700 gain.
15. b $0 – $4,200 = $4,200 loss.
28. b 100,000 less pref dividend in arrears and current year 20,000 x $0.80x 2 years
29. b Current year 20,000 x0.80 or 16,000 to pref, like amount or 8%
(16000/200,000) to common 8% x 300,000 or 24,000. Total current year is
16,000 plus 24,000 or 40,000
Participating pro rata: amount available 70,000 minus current year of 40,000
or 30,000 30,000/(200,000 plus 300,000) or 6% rate of participation –
preferred 6%x200,000 or 12,000, common 6% x 300,000 or 18,000. Total to
common: 24,000 + 18,000 or 42,000
30. b Dividend in arrears 20,000 x 0.80 or 16,000 to preferred. Current year 20,000
x0.80 or 16,000 to pref, like amount or 8% (16000/200,000) to common 8% x
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300,000 or 24,000. Total current year is 16,000 plus 24,000 or 40,000
Participating pro rata: amount available 101,000 minus arrears of 16,000 +
current year of 40,000 or 45,000 (101,000 – 56,000) 45,000/(200,000 plus
300,000) or 9% rate of participation – preferred 9%x200,000 or 18,000,
common 9% x 300,000 or 27,000. Total to common: 24,000 + 27,000 or
51,000
II. Stockholders’ Equity (15 points)
a) (11 marks – one for each line of journal entry)
Jan 20:
Preferred shares ($2,040,000 ÷ 20,000) × 1,000............................. 102,000
Retained earnings............................................................................ 5,000
Cash ($107 × 1,000)............................................................... 107,000
Jan 28:
Retained earnings............................................................................ 100,000
Preferred dividends payable (19,000 × $1)............................ 19,000
Common dividends payable ($100,000 – $19,000)................ 81,000
Feb 28:
Common shares (8,000 × ($640,000 ÷ 80,000))............................. 64,000
Contributed surplus (retirement of common shares)...................... 32,000
Cash (8,000 × $12)................................................................. 96,000
Mar 2:
Retained earnings (72,000 × 3% × $11.50) 24,840
Common shares....................................................................... 24,840
Part b) (4 marks)
Share Capital
Preferred shares, $1, no par value, 100,000 shares authorized, cumulative,
callable at $107 plus dividends in arrears; issued and outstanding, 20,000 shares
$2,040,000 – 102,000....................................................................$1,938,000 (1 mark)
Common shares, no par, 100,000 shares authorized,
80,000 issued and outstanding..............................................................
640,000-64,000+24,840................................................................. 600,840 (1 mark)
Total Share capital............................................................................... 2,538,840
Contributed surplus (retirement of common shares)............................
120,000-32,000.............................................................................. 88,000( 1 mark)
Total paid-in capital.............................................................................. 2,626,840
Retained earnings......................................................................
1,600,000-5,000-100,000-24,840+180,000................................... 1,650,160 (1 mark)
Total Shareholder’s Equity $4,277,000
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Document Summary

Blue version: mc answer (30 @ 2 = 60 points) 1. (b) 2. (d) 3. (a) 4. (b) 5. (c) 6. (c) 7. (b) 8. (d) 9. (c) 10. (a) 9. converted to common so no pref dividends subtracted from net income. = . 31. if converted method assumes that pref shares are. 28: 6,000,000 + (1,000,000 9/12) + (500,000 6/12) = 7,000,000 (beps). 7,000,000 calc above + (25,000 20 3/12) = 7,125,000 (deps). a b d b max[-1,000, 0] = sh. Option premium = intrinsic value (sh) + time value = . ,200 fair value less recorded cost = ,700 gain. 100,000 less pref dividend in arrears and current year 20,000 x sh. 80x 2 years b. Current year 20,000 x0. 80 or 16,000 to pref, like amount or 8% 16,000 plus 24,000 or 40,000 or 30,000 preferred 6%x200,000 or 12,000, common 6% x 300,000 or 18,000. Participating pro rata: amount available 70,000 minus current year of 40,000.

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