Financial & Managerial Accounting
Financial & Managerial Accounting
17th Edition
ISBN: 9780078025778
Author: Jan Williams, Susan Haka, Mark S Bettner, Joseph V Carcello
Publisher: McGraw-Hill Education
bartleby

Videos

Question
Book Icon
Chapter 12, Problem 8AP

a.

To determine

Prepare the stockholders’ equity section of the balance sheet for Corporation M at December 31, 2015.

a.

Expert Solution
Check Mark

Explanation of Solution

Stockholders’ equity section: The section of balance sheet which reports the changes in stock, paid-in capital, retained earnings, and treasury stock, during the year is referred to as stockholders’ equity section.

Prepare the stockholders’ equity section of the balance sheet for Corporation M at December 31, 2017.

Financial & Managerial Accounting, Chapter 12, Problem 8AP , additional homework tip  1

Table (1)

Working Notes:

Compute the capital stock value.

Capital stock value = {Number of shares issued × Par value per share}= 150,000 shares × $10= $1,500,000

Compute the amount of stock dividends to be distributed.

Step 1: Compute the number of shares to be distributed as stock dividends.

Stock dividend shares = {Number of shares outstanding ×Stock dividend percentage}(150,000 shares –10,000 shares)× 10%=140,000 shares × 10%= 14,000 shares (1)

Step 2: Compute the amount of stock dividends to be distributed (Refer to Equation (1) for stock dividend shares value).

Stock dividends to be distributed value} = Stock dividend shares × Par value of stock= 14,000 shares × $10= $140,000

Compute additional paid-in capital from issuance of stock.

Additional paid-in capital from issuance of stock} = {Number of shares issued×(Market value – Par value)}= 150,000 shares ×($30 – $10)= $3,000,000

Compute additional paid-in capital from stock dividends (Refer to Equation (1) for stock dividend shares).

Additional paid-in capital from stock dividend} = Stock dividend shares × (Market value – Par value)= 14,000 shares ×($35 – $10)= $350,000

Compute amount of retained earnings for the year ended December 31, 2015.

Step 1: Compute amount of retained earnings distributable for stock dividends (Refer to Equation (1) for stock dividend shares value).

Stock dividend = Stock dividend shares × Market value per share= 14,000 shares × $35= $490,000 (2)   

Step 2: Compute amount of retained earnings.

Corporation M
Statement of Retained Earnings
For the Year Ended December 31, 2015
Retained earnings, January 1, 2015$0
Add: Net income940,000
940,000
Less: Stock dividends(490,000)
Retained earnings, December 31, 2015$450,000

Table (2)

Note: Refer to Equation (2) for value and computation of stock dividends.

Conclusion

Thus, the total stockholders’ equity of Corporation M December 31, 2015 is $5,100,000.

b.

To determine

Prepare the stockholders’ equity section of the balance sheet for Corporation M at December 31, 2016.

b.

Expert Solution
Check Mark

Explanation of Solution

Prepare the stockholders’ equity section of the balance sheet for Corporation M at December 31, 2016.

Financial & Managerial Accounting, Chapter 12, Problem 8AP , additional homework tip  2

Table (3)

Working Notes:

Compute the number of shares issued and outstanding, after the stock dividend and stock split transactions.

Number of shares issued and outstanding} = {(Number of shares issued+ Number of stock dividend shares)× Number of shares for 1 common share}=(150,000 shares +14,000 shares)×2 shares=164,000 shares×2 shares=328,000 shares (3)

Compute the capital stock value (Refer to Equation (3) for value of number of shares issued and outstanding).

Capital stock value = {Number of shares issued and outstanding× Par value per share}= 328,000 shares × $5= $1,640,000

Compute additional paid-in capital value from treasury stock.

Additional paid-in capital from treasury stock} = {Number of treasury shares reissued × (Selling price–Purchase price)}= 10,000 shares × ($39–$34)= 10,000 shares × $5= $50,000

Compute amount of retained earnings for the year ended December 31, 2016.

Step 1: Compute amount of cash dividends.

Cash dividends={Number of common shares×Dividend per share}=328,000 shares×$2 per share=$656,000 (4)   

Step 2: Compute amount of retained earnings.

Corporation M
Statement of Retained Earnings
For the Year Ended December 31, 2016
Retained earnings, January 1, 2018$450,000
Add: Net income1,080,000
1,530,000
Less: Cash dividends(656,000)
Retained earnings, December 31, 2016$874,000

Table (4)

Note: Refer to Table (2) for value and computation of opening retained earnings balance, and Equation (4) for value and computation of cash dividends.

Conclusion

Thus, the total stockholders’ equity of Corporation M at December 31, 2016 is $5,914,000.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 12 Solutions

Financial & Managerial Accounting

Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
IAS 29 Financial Reporting in Hyperinflationary Economies: Summary 2021; Author: Silvia of CPDbox;https://www.youtube.com/watch?v=55luVuTYLY8;License: Standard Youtube License