MGAB02H3 Chapter Notes - Chapter 12: Authorised Capital, Pro Rata, Issued Shares
Comprehensive The shareholders' equity section of SuperiorCorporation's balance sheet as of December 31, 2012, is as follows:Shareholdersâ Equity Preferred stock, $100 par value; authorized,150,000 shares; issued, 15,000 shares $1,500,000 Common stock, $5par value; authorized, 1,000,000 shares; issued, 200,000 shares1,000,000 Paid-in capital in excess of parâpreferred 75,000 Paid-incapital in excess of parâcommon 425,000 Retained earnings 3,000,000$6,000,000 The following events occurred during 2013: Jan. 5 10,000shares of authorized and unissued common stock were sold for $10per share. Jan. 16 10,000 shares of authorized and unissuedpreferred stock were sold for $108 per share. April 1 80,000 sharesof common stock were repurchased for the treasury at a price of $15per share. Superior uses the cost method to account for treasurystock. Sept. 1 4,000 shares of preferred stock are issued inexchange for a piece of land. The land has an appraised value of$439,000. The preferred stock currently trades on the New YorkStock exchange at a price of $108 per share. Dec. 1 30,000 sharesof treasury stock are reissued at a price of $20 per shareRequired: Hide 1. Prepare journal entries for each of the abovetransactions. For a compound transaction, if an amount box does notrequire an entry, leave it blank. Jan. 5 Cash 100,000 Common Stock50,000 Additional Paid-in Capital on Common Stock 50,000 Jan. 16Cash 1,080,000 Preferred Stock 1,000,000 Additional Paid-in Capitalon Preferred Stock 80,000 April 1 Treasury Stock 1,200,000 Cash1,200,000 Sept. 1 Land 432,000 Preferred Stock 400,000 AdditionalPaid-in Capital on Preferred Stock 32,000 Dec. 1 Cash 600,000Treasury Stock 450,000 Additional Paid-in Capital on Treasury Stock150,000 Hide Feedback Correct Check My Work Feedback When a companyissues common (or preferred) stock for cash, you should record thetotal par value (Number of Shares x Par Value per Share) in theCommon (or Preferred) Stock account, with any excess recorded asAdditional Paid-in Capital. Under the cost method, when thecorporation reacquires its capital stock you should debit anaccount entitled Treasury Stock (and credit Cash or otherappropriate asset accounts) for the cost paid to reacquire theshares. When the corporation reissues the treasury shares, youshould reduce (credit) the Treasury Stock account for the cost ofthe shares reissued and record the difference between the cashreceived and the cost of the reissued shares as an adjustment ofshareholders' equity. If the cash received exceeds the cost of thereissued treasury stock, you should record the excess as anincrease in additional paid-in capital from treasury stock. If thecash is less than the cost, you should record the "deficit" as areduction of additional paid-in capital from treasury stock. If theadditional paid-in capital from treasury stock is insufficient toabsorb the deficit, you should record the remainder as a reductionin retained earnings. If a company issues capital stock forservices or assets other than cash, you should record thetransaction at the fair value of the stock issued or the noncashconsideration received, whichever is more representationallyfaithful. 2. Calculate the number of authorized, issued, andoutstanding common shares as of December 31, 2013. Authorizedcommon shares: 1,000,000 shares Issued shares: 210,000 sharesOutstanding shares: 160,000 shares Hide Feedback Correct Check MyWork Feedback Authorized capital stock is the number of shares ofcapital stock (both preferred and common) that a corporation mayissue as stated in its corporate charter. Issued capital stock isthe number of shares of capital stock that a corporation has issuedto its shareholders as of a specific date. Outstanding capitalstock is the number of shares of capital stock that a corporationhas issued to shareholders and that are still being held byshareholders as of a specific date. 3. Calculate Superior's legalcapital at December 31, 2013.
Problem 18-12 Various shareholders' equity topics; comprehensive[LO18-1, 18-4, 18-5, 18-6, 18-7, 18-8]
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.
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.)
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.)
|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.|
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.)
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.)
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.
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.
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.)
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|
|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)|
|Total shareholders' equity||$ 68,709|
|Consolidated Statement of Shareholders' Equity|
Dollars in millions;
Shares in thousands
|Balance June 30, 2012||$ 2,748,033||$ 4,008||$ 1,195||$ 63,181||$ (1,357)||$ (9,333)||$ (69,604)||$ 75,349||$ 596||$ 64,035|
|Other comprehensive income||1,834||1,834|
|Dividends to shareholders:|
|Preferred, net of tax benefits||(244)||(244)|
|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?
(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.)
(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
Preferred dividends =Answer($ millions)