MGAB02H3 Chapter Notes - Chapter 12: Authorised Capital, Pro Rata, Issued Shares
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Problem 18-12 Various shareholders' equity topics; comprehensive[LO18-1, 18-4, 18-5, 18-6, 18-7, 18-8]
Part A |
In late 2015, the Nicklaus Corporation was formed. The corporatecharter authorizes the issuance of 5,000,000 shares of common stockcarrying a $1 par value, and 1,000,000 shares of $5 par value,noncumulative, nonparticipating preferred stock. On January 2,2016, 3,000,000 shares of the common stock are issued in exchangefor cash at an average price of $15 per share. Also on January 2,all 1,000,000 shares of preferred stock are issued at $30 pershare. |
Required: |
1. | Prepare journal entries to record these transactions.(If no entry is required for a particular transaction,select "No journal entry required" in the first accountfield.) |
2. | Prepare the shareholders' equity section of the Nicklaus balancesheet as of March 31, 2016. (Assume net income for the firstquarter 2016 was $1,500,000.) |
Part B | |
During 2016, the Nicklaus Corporation participatedin three treasury stock transactions: |
a. | On June 30, 2016, the corporation reacquires 190,000 shares forthe treasury at a price of $17 per share. |
b. | On July 31, 2016, 45,000 treasury shares are reissued at $20per share. |
c. | On September 30, 2016, 45,000 treasury shares are reissued at$15 per share. |
Required: |
1. | Prepare journal entries to record these transactions.(If no entry is required for a transaction/event, select"No journal entry required" in the first accountfield.) |
2. | Prepare the Nicklaus Corporation shareholders' equity section asit would appear in a balance sheet prepared at September 30, 2016.(Assume net income for the second and third quarter was$2,950,000.) |
Part C |
On October 1, 2016, Nicklaus Corporation receives permission toreplace its $1 par value common stock (5,000,000 shares authorized,3,000,000 shares issued, and 2,900,000 shares outstanding) with anew common stock issue having a $.50 par value. Since the new parvalue is one-half the amount of the old, this represents a 2-for-1stock split. That is, the shareholders will receive two shares ofthe $.50 par stock in exchange for each share of the $1 par stockthey own. The $1 par stock will be collected and destroyed by theissuing corporation. |
On November 1, 2016, the NicklausCorporation declares a $0.13 per share cash dividend on commonstock and a $0.30 per share cash dividend on preferred stock.Payment is scheduled for December 1, 2016, to shareholders ofrecord on November 15, 2016. |
On December 2, 2016, the NicklausCorporation declares a 1% stock dividend payable on December 28,2016, to shareholders of record on December 14. At the date ofdeclaration, the common stock was selling in the open market at $15per share. The dividend will result in 58,000 (0.01 Ã 5,800,000)additional shares being issued to shareholders. |
Required: |
Prepare journal entries to record the declaration and payment ofthese stock and cash dividends. (If no entry is requiredfor a transaction/event, select "No journal entry required" in thefirst account field.) 1.Record the entry for a 2-for-1 stock split. 2.Record declaration of cash dividend for common shares andpreferred shares. 3.Record the entry on date of record. 4.Record payment of cash dividend for common shares andpreferred shares. 5.Record declaration of common stock dividend. 6.Record distribution of common stock dividend. | |
2. | Prepare the December 31, 2016, shareholders' equity section ofthe balance sheet for the Nicklaus Corporation. (Assume net incomefor the fourth quarter was $2,450,000.) |
3. | Prepare a statement of shareholders' equity for NicklausCorporation for 2016. (Amounts to be deducted should beindicated with a minus sign. Enter your answers inthousands.) |
Analyzing and Interpreting Equity Accounts and Comprehensive Income
Following is the shareholdersâ equity section of the 2013 balance sheet for Procter & Gamble Company and its statement of shareholdersâ equity.
June 30 (In millions, except per share amounts) | 2013 |
---|---|
Shareholders' Equity | |
Convertible Class A preferred stock, stated value $ 1 per share | |
(600 shares authorized) | $ 1,137 |
Non-voting Class B preferred stock, stated value $ 1 per share | |
(200 shares authorized) | -- |
Common stock, stated value $ 1 per share | |
(10,000 shares authorized; shares issued: 2013-4,009.2) | 4,009 |
Additional paid-in capital | 63,538 |
Reserve for ESOP debt retirement | (1,352) |
Accumulated other comprehensive income/(loss) | (7,499) |
Treasure stock, at cost (shares held: 2013-1,266.9) | (71,966) |
Retained earnings | 80,197 |
Noncontrolling interest | 645 |
Total shareholders' equity | $ 68,709 |
Consolidated Statement of Shareholders' Equity | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Dollars in millions; Shares in thousands | Common Shares Outstanding | Common Stock | Preferred Stock | Additional Paid-in Capital | Reserve for ESOP Debt Retirement | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Retained Earnings | Noncontrolling Interest | Total |
Balance June 30, 2012 | $ 2,748,033 | $ 4,008 | $ 1,195 | $ 63,181 | $ (1,357) | $ (9,333) | $ (69,604) | $ 75,349 | $ 596 | $ 64,035 |
Net earnings | 11,312 | 90 | 11,402 | |||||||
Other comprehensive income | 1,834 | 1,834 | ||||||||
Dividends to shareholders: | ||||||||||
Common | (6,275) | (6,275) | ||||||||
Preferred, net of tax benefits | (244) | (244) | ||||||||
Treasury purchases | (84,234) | (5,986) | (5,986) | |||||||
Employee plan issuances | 70,923 | 1 | 352 | 3,573 | 3,926 | |||||
Preferred stock conversions | 7,605 | (58) | 7 | 51 | â | |||||
ESOP debt impacts | 5 | 55 | 60 | |||||||
Noncontrolling interest, net | (2) | (41) | (43) | |||||||
Balance June 30, 2013 | $ 2,742,327 | $ 4,009 | $ 1,137 | $ 63,538 | $ (1,352) | $ (7,499) | $ (71,966) | $ 80,197 | $ 645 | $ 68,709 |
(a) What does the term convertible (in reference to the company's Class A preferred stock) mean?
Convertible means the holder of the security has an obligation to convert (exchange) the security into another security.
Convertible means the holder of the security has an option to surrender the security and to receive cash at any time.
Convertible means the holder of the security has an option to convert (exchange) the security into another security.
Convertible means the holder of the security has an option to sell the security at any time.
(b) How many shares of common stock did Procter & Gamble issue when convertible Class A preferred stock was converted during fiscal 2013?
Answer
thousand shares
(c) For "employee plan issuances," at what average price was the common stock issued as of year-end 2013? (Round your answer to two decimal places.)
$Answer
(d) What is the accumulated other comprehensive income account?
The accumulated other comprehensive income account reflects the cumulative profit recognized by the company less the cumulative dividends that have been paid to shareholders.
The accumulated other comprehensive income account reflects the cumulative change in net assets (defined as assets less liabilities) for transactions other than net income transactions and transactions with shareholders.
The accumulated other comprehensive income account reflects the cumulative profit on transactions with shareholders.
The accumulated other comprehensive income account reflects the cumulative amount by which the company's common stock has increased or decreased since issuance.
(e) What cash dividends did Procter & Gamble pay in 2013 for each class of stock?
Common dividends =Answer
($ millions)
Preferred dividends =Answer($ millions)