2024 – Do It Review 11 1 Indicate whether each of the following statements is true or false 1

Do It! Review 11-1

Indicate whether each of the following statements is true or false.

1.  The corporation is an entity separate and distinct from its owners.   

2.  The liability of stockholders is normally limited to their investment in the corporation.   

3.  The relative lack of government regulation is an advantage of the corporate form of business.   

4.  There is no journal entry to record the authorization of capital stock.   

5.  No-par value stock is quite rare today.  

Exercise 11-5

Garcia Corporation recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation’s capital stock.

May 2 Cash 103,220

     Capital Stock  103,220

        (Issued 7,940 shares of $11 par value common stock at $13 per share)  

10 Cash 621,160

     Capital Stock  621,160

        (Issued 11,720 shares of $17 par value preferred stock at $53 per share)  

15 Capital Stock 8,400

     Cash  8,400

        (Purchased 840 shares of common stock for the treasury at $10 per share)  

 

On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Exercise 11-7

On October 31, the stockholders’ equity section of Pele Company’s balance sheet consists of common stock $548,400 and retained earnings $443,400.

 

Pele is considering the following two courses of action:

(1) Declaring a 6% stock dividend on the 91,400 $6 par value shares outstanding

(2) Effecting a 2-for-1 stock split that will reduce par value to $3 per share.

The current market price is $15 per share.

Prepare a tabular summary of the effects of the alternative actions on the company’s stockholders’ equity and outstanding shares.

Broadening Your Perspective 11-1

The stockholders’ equity section of Tootsie Roll Industries’ balance sheet is shown in the Consolidated Statement of Financial Position. (Note that Tootsie Roll has two classes of common stock. To answer the following questions, add the two classes of stock together.)

 

Broadening Your Perspective 11-2

The financial statements of The Hershey Company and Tootsie Roll are presented below.

11-5A

Pringle Corporation has been authorized to issue 23,300 shares of $100 par value, 7%, noncumulative preferred stock and 1,191,200 shares of no-par common stock.

 

The corporation assigned a $5 stated value to the common stock. At December 31, 2014, the ledger contained the following balances pertaining to stockholders’ equity.

Preferred Stock $156,300

Paid-in Capital in Excess of Par Value—Preferred Stock 22,990

Common Stock 1,950,000

Paid-in Capital in Excess of Stated Value—Common Stock 1,680,000

Treasury Stock— (3,720 common shares) 33,480

Retained Earnings 82,100

 

The preferred stock was issued for $179,290 cash. All common stock issued was for cash. In November 3,720 shares of common stock were purchased for the treasury at a per share cost of $9. No dividends were declared in 2014.

 

Prepare the journal entries for the following. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(1) Issuance of preferred stock for cash.

(2) Issuance of common stock for cash.

(3) Purchase of common treasury stock for cash.

On January 1, 2014, Everett Corporation had these stockholders’ equity accounts.

Common Stock ($10 par value, 74,400 shares issued and outstanding) $744,000

Paid-in Capital in Excess of Par Value 508,600

Retained Earnings 671,800

 

During the year, the following transactions occurred.

Jan. 15 Declared a $0.60 cash dividend per share to stockholders of record on January 31, payable February 15.

Feb. 15 Paid the dividend declared in January.

Apr. 15 Declared a 10% stock dividend to stockholders of record on April 30, distributable May 15. On April 15, the market price of the stock was $16 per share.

May 15 Issued the shares for the stock dividend.

Dec. 1 Declared a $0.60 per share cash dividend to stockholders of record on December 15, payable January 10, 2015.

Dec. 31 Determined that net income for the year was $392,300.

 

Journalize the transactions. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.)