Chapter 11 - Reporting and Interpreting Owners’ Equity
EXERCISES
E11–1.
Computation of End of Year Balance for Treasury Stock:
Beginning balance Net increase
307,532,841 75,874,824 383,407,665
Ending balance
Computation of Shares Outstanding: E11–2.
Req. 1 The number of authorized shares is specified in the corporate charter: 300,000. Req. 2 Issued shares are the shares sold to the public: 160,000 Req. 3
Issued shares 160,000 Treasury stock
(25,000) Issued shares Treasury stock
2,109,316,331 ( 383,407,665) 1,725,908,666
Shares Outstanding
Outstanding shares 135,000
Financial Accounting, 8/e 11-9 ? 2014 by McGraw-Hill Global Education Holdings, LLC. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 11 - Reporting and Interpreting Owners’ Equity
E11–3. Req. 1
Stockholders’ Equity
Contributed capital: Preferred stock, authorized 4,000 shares,
issued and outstanding, 3,000 shares ...................................................... $ 24,000 Common stock, authorized 103,000 shares,
issued and outstanding, 20,000 shares .................................................... 200,000 Capital in excess of par, preferred .............................................................. 36,000 Capital in excess of stated value, no-par common ..................................... 120,000 Total contributed capital .......................................................................... 380,000 Retained earnings .......................................................................................... 60,000 Total Stockholders’ Equity ....................................................................... $440,000 Req. 2
The answer would depend on the profitability of the company and the stability of its earnings. The preferred stock has a 9% dividend rate. If the company earns more than 9%, the additional earnings would accrue to the current stockholders. If the company earns less than 9%, it would pay a higher rate to the preferred stockholders. E11–4.
Req. 1 ($30 x 90,000 shares) - $1,600,000 = $1,100,000 Req. 2 $900,000 - $1,000,000 + $800,000 = $700,000 Req. 3 90,000 shares – 80,000 shares = 10,000 shares Req. 4 EPS = $1,000,000 ?80,000 = $12.50
11-10 Solutions Manual ? 2014 by McGraw-Hill Global Education Holdings, LLC. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 11 - Reporting and Interpreting Owners’ Equity
E11–5.
Req. 1
a. Cash (5,600 shares x $20) (+A) ............................................ 112,000 Common stock (5,600 shares x $10) (+SE) ...................... Capital in excess of par, common stock (+SE) .................. Sold common stock at a premium. b.
Cash (1,000 shares x $25) (+A) ............................................ Common stock (1,000 shares x $10) (+SE) ...................... Capital in excess of par, common stock (+SE) .................. Sold common stock at a premium.
25,000
56,000 56,000 10,000 15,000
Req. 2
Stockholders’ Equity
Contributed capital: Common stock, par $10, authorized 11,500 shares, outstanding 6,600 shares .................................................................... $ 66,000 Contributed capital in excess of par ........................................................ 71,000 Total contributed capital .......................................................................... 137,000 Retained earnings ...................................................................................... 12,000 Stockholders’ equity ................................................................................... $149,000
Financial Accounting, 8/e 11-11
? 2014 by McGraw-Hill Global Education Holdings, LLC. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 11 - Reporting and Interpreting Owners’ Equity
E11–6. Req. 1
Common stock, class A at par value: 118,529,925 X $0.01 = $1,185 (thousand) Req. 2
(Note that this solution is based on the number of Class A common shares that are
outstanding. We elect not to include the Class B shares because they are owned by the Dillard family. Usually, students do not question this assumption but when they do, it permits us to discuss reasons for issuing different types of common stock. In this case, owners of Class B shares are permitted to elect two-thirds of the board of directors, effectively letting the founding family maintain control of a public company). Number of shares outstanding 2012: 118,529,925 shares issued minus 73,099,319 shares held as treasury stock = 45,430,606. Number of shares outstanding 2011: 117,706,523 shares issued minus 61,740,439 shares held as treasury stock = 55,966,084. Req. 3
(In thousands) Retained earnings for 2011: $3,107,344minusnet income for 2012 $463,909 plus dividends for 2012 $10,002 = $2,653,437 Req. 4
As of 2012, treasury stock had decreased corporate resources by $1,846,312 (thousand). Req. 5
Treasury stock transactions decreased stockholders’ equity by $490,786 (thousand) ($1,846,312 - $1,355,526). Req. 6
For 2012, treasury stock cost per share: $1,846,312 (thousand) ÷ 73,099,319 shares = $25.26.
11-12 Solutions Manual ? 2014 by McGraw-Hill Global Education Holdings, LLC. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
