2024 – Complete Exercises E11 15 E12 1 E12 2 Complete Problem 11 6A Submit as a Microsoft Excel

Complete Exercises E11-15, E12-1, & E12-2.

Complete Problem 11-6A.

Submit as a Microsoft® Excel® or Word document.

 

E11-15 On October 31, the stockholders’ equity section of Omar Company consists of common

 

stock $600,000 and retained earnings $900,000. Omar is considering the following two

 

courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares outstanding,

 

or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current

 

market price is $14 per share.

 

Instructions

 

Prepare a tabular summary of the effects of the alternative actions on the components of stockholders’

 

equity and outstanding shares. Use the following column headings: Before Action,After Stock Dividend, and After Stock Split.

 

 

 

P11-6A Arnold Corporation has been authorized to issue 40,000 shares of $100 par value, 8%,

 

noncumulative preferred stock and 2,000,000 shares of no-par common stock. The corporation

 

assigned a $5 stated value to the common stock. At December 31, 2011, the ledger contained the

 

following balances pertaining to stockholders’ equity.

 

Preferred Stock $ 240,000

 

Paid-in Capital in Excess of Par Value—Preferred 56,000

 

Common Stock 2,000,000

 

Paid-in Capital in Excess of Stated Value—Common 5,700,000

 

Treasury Stock—Common (1,000 shares) 22,000

 

Paid-in Capital from Treasury Stock 3,000

 

Retained Earnings 560,000

 

The preferred stock was issued for land having a fair market value of $296,000.All common stock

 

issued was for cash. In November, 1,500 shares of common stock were purchased for the treasury

 

at a per share cost of $22. In December, 500 shares of treasury stock were sold for $28 per share.

 

No dividends were declared in 2011.

 

Instructions

 

(a) Prepare the journal entries for the:

 

(1) Issuance of preferred stock for land.

 

(2) Issuance of common stock for cash.

 

(3) Purchase of common treasury stock for cash.

 

(4) Sale of treasury stock for cash.

 

(b) Prepare the stockholders’ equity section at December 31, 2011.

 

E12-1 Max Weinberg is studying for an accounting test and has developed the following questions

 

about investments.

 

1. What are three reasons why companies purchase investments in debt or stock securities?

 

2. Why would a corporation have excess cash that it does not need for operations?

 

3. What is the typical investment when investing cash for short periods of time?

 

4. What are the typical investments when investing cash to generate earnings?

 

5. Why would a company invest in securities that provide no current cash flows?

 

6. What is the typical stock investment when investing cash for strategic reasons?

 

Instructions

 

Provide answers for Max.

 

 

 

E12-2 Foren Corporation had the following transactions pertaining to debt investments.

 

Jan. 1 Purchased 50 8%, $1,000 Choate Co. bonds for $50,000 cash plus brokerage fees of

 

$900. Interest is payable semiannually on July 1 and January 1.

 

July 1 Received semiannual interest on Choate Co. bonds.

 

July 1 Sold 30 Choate Co. bonds for $34,000 less $500 brokerage fees.

 

Instructions

 

(a) Journalize the transactions.

 

(b) Prepare the adjusting entry for the accrual of interest at December 31.