Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
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Chapter 13, Problem 13.6CP
(1)
To determine
Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.
Case study
To discuss: The arguments for and against classifying the issuance of the $25 million of stock as debt.
(2)
To determine
To elect: A practical Explanation to this classification problem.
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a. Journalize the transactions of January 31, June 14, and November 23. If an amount box does not require an entry, leave it blank.
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b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?$fill in the blank
c. What is the balance in Treasury Stock on December 31 of…
Lawn Spray Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On January 31 of the current year, Lawn Spray Inc. reacquired 15,100 shares of its common stock at $36 per share. On June 14, 9,500 of the reacquired shares were sold at $38 per share, and on November 23, 3,600 of the reacquired shares were sold at $41.
a. Journalize the transactions of January 31, June 14, and November 23. For a compound transaction, if an amount box does not require an entry, leave it blank.
b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?$fill in the blank dd6810fe4016049_1
c. What is the balance in Treasury Stock on December 31 of the current year?$fill in the blank dd6810fe4016049_3
d. How will the balance in Treasury Stock be reported on the balance sheet?
Chapter 13 Solutions
Accounting
Ch. 13 - Of two corporations organized at approximately the...Ch. 13 - Prob. 2DQCh. 13 - A corporation with both preferred stock and common...Ch. 13 - An owner of 2,500 shares of Simmons Company common...Ch. 13 - Prob. 5DQCh. 13 - What is the primary purpose of a stock split?Ch. 13 - Prob. 7DQCh. 13 - The treasury stock in Discussion Question 7 is...Ch. 13 - What are the three classifications of restrictions...Ch. 13 - Indicate how prior period adjustments should he...
Ch. 13 - A Dividends per share Reinhardt Furniture Company...Ch. 13 - Dividends per share Zero Calories Company has...Ch. 13 - Entries for issuing stock On May 23, Stoltz Realty...Ch. 13 - Entries for issuing stock On January 22, Zentric...Ch. 13 - Prob. 13.3APECh. 13 - Entries for cash dividends The declaration,...Ch. 13 - Prob. 13.4APECh. 13 - Entries for stock dividends Antique Buggy...Ch. 13 - Prob. 13.5APECh. 13 - Entries for treasury stock On May 27, Hydro...Ch. 13 - Reporting stockholders' equity Using the following...Ch. 13 - Reporting stockholders' equity Using the following...Ch. 13 - Retained earnings statement Rockwell Inc. reported...Ch. 13 - Retained earnings statement None Cruises Inc....Ch. 13 - Earnings per share Financial statement data for...Ch. 13 - Earnings per share Financial statement data for...Ch. 13 - Dividends per share Imaging Inc., a developer of...Ch. 13 - Dividends per share Lightfoot Inc., a software...Ch. 13 - Prob. 13.3EXCh. 13 - Prob. 13.4EXCh. 13 - Issuing stock for assets other than cash On April...Ch. 13 - Prob. 13.6EXCh. 13 - Issuing stock Willow Creek Nursery, with an...Ch. 13 - Issuing stock Work Place Products Inc., a...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Prob. 13.10EXCh. 13 - Prob. 13.11EXCh. 13 - Prob. 13.12EXCh. 13 - Prob. 13.13EXCh. 13 - Prob. 13.14EXCh. 13 - Treasury stock transactions Lawn Spray Inc....Ch. 13 - Prob. 13.16EXCh. 13 - Reporting paid-in capital The following accounts...Ch. 13 - Stockholders' Equity section of balance sheet The...Ch. 13 - Prob. 13.19EXCh. 13 - Retained earnings statement Sumter Pumps...Ch. 13 - Prob. 13.21EXCh. 13 - Statement of stockholders' equity The...Ch. 13 - EPS Junkyard Am, Inc., had earnings of 516,000 for...Ch. 13 - Prob. 13.24EXCh. 13 - EPS Caterpillar Inc. and Deere Company are two...Ch. 13 - Prob. 13.1APRCh. 13 - Prob. 13.2APRCh. 13 - Selected stock transactions The following selected...Ch. 13 - Entries for selected corporate transactions Morrow...Ch. 13 - Entries for selected corporate transactions...Ch. 13 - Prob. 13.1BPRCh. 13 - Stock transaction for corporate expansion Pulsar...Ch. 13 - Selected stock transactions Diamondback Welding ...Ch. 13 - Entries for selected corporate transactions Nav-Go...Ch. 13 - Entries for selected corporate transactions West...Ch. 13 - Prob. 13.1CPCh. 13 - Prob. 13.2CPCh. 13 - Communication Motion Designs Inc. has paid...Ch. 13 - Prob. 13.5CPCh. 13 - Prob. 13.6CP
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We are so close! It would be a disaster to quit now. The only thing I can think of is to issue additional stock. Do you have any suggestions? Amber: I guess youre right. But if the banks wont loan us any more money, how can we find any investors to buy stock? Barb: Ive been thinking about that. What if we promise the investors that we will pay them 5% of sales until they receive an amount equal to what they paid for the stock? Amber: What happens when we pay back the 25 million? Do the investors get to keep the stock? If they do, itll dilute our ownership. Barb: How about if after we pay back the 25 million, we make them turn in their stock for 120 per share? Thats one and one-half times what they paid for it, and they would have already gotten all their money back. Thats a 120 profit per share for the investors. Amber: It could work. We get our money but dont have to pay any interest, dividends, or the 80 per share until we start generating sales. At the same time, the investors could get their money back plus 120 per share profit. Barb: Well need current financial statements for the new investors. Ill get our accountant working on them and contact our attorney to draw up a legally binding contract for the new investors. Yes, this could work. In late 20Y8, the attorney and the various regulatory authorities approved the new stock offering, and 312,500 shares of common stock were privately sold to new investors at the stocks par of 80. In preparing financial statements for 20Y8, Barb Abrams and Dan Fisher, the controller for Epstein Engineering Inc., have the following conversation: Dan: Barb, Ive got a problem. Barb: Whats that, Dan? Dan: Issuing common stock to raise that additional 25 million was a great idea. But . . . Barb: But what? Dan: Ive got to prepare the 20Y8 annual financial statements, and I am not sure how to classify the common stock. Barb: What do you mean? Its common stock. Dan: Im not so sure. 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