Reference no: EM133139032

Question 1 - Dividends on Preferred and Common Stock - Pecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: 20Y1, $48,000; 20Y2, $96,000; 20Y3, $228,000; 20Y4, $276,000; 20Y5, $348,000; and 20Y6, $420,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 30,000 shares of cumulative, preferred 4% stock, $100 par, and 100,000 shares of common stock, $15 par.

Required - 1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears at the beginning of 20Y1. Summarize the data in tabular form. If required, round your per share answers to two decimal places. If the amount is zero, please enter "0".

2. Determine the average annual dividend per share for each class of stock for the six-year period. If required, round your answers to two decimal places.

3. Assuming a market price per share of $244 for the preferred stock and $21 for the common stock, determine the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.

Question 2 - Stock Transactions for Corporate Expansion - On December 1 of the current year, the following accounts and their balances appear in the ledger of Latte Corp., a coffee processor:

Preferred 3% Stock, $75 par (300,000 shares authorized, 80,000 shares issued) $6,000,000

Paid-In Capital in Excess of Par-Preferred Stock 960,000

Common Stock, $100 par (1,000,000 shares authorized, 220,000 shares issued) 22,000,000

Paid-In Capital in Excess of Par-Common Stock 1,760,000

Retained Earnings 44,000,000

At the annual stockholders' meeting on March 31, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately $16,100,000. The plan provided (a) that a building, valued at $2,600,000, and the land on which it is located, valued at $3,800,000, be acquired in accordance with preliminary negotiations by the issuance of 60,000 shares of common stock valued at $93 per share, (b) that 50,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that the corporation borrow $5,700,000. The plan was approved by the stockholders and accomplished by the following transactions:

May 11. Issued 60,000 shares of common stock in exchange for land and a building, according to the plan.

May 20. Issued 50,000 shares of preferred stock, receiving $80 per share in cash.

May 31. Borrowed $5,700,000 from Laurel National, giving a 6% mortgage note.

Required - Journalize the entries to record the foregoing transactions. If an amount box does not require an entry, leave it blank.

May 11. Issued 60,000 shares of common stock in exchange for land and a building, according to the plan.

May 20. Issued 50,000 shares of preferred stock, receiving $80 per share in cash.

May 31. Borrowed $5,700,000 from Laurel National, giving a 6% mortgage note.

Question 3 - Selected Stock Transactions - The following selected accounts appear in the ledger of Upscale Construction Inc. at the beginning of the current year:

Preferred 2% Stock, $50 par (30,000 shares authorized, 15,000 shares issued) $750,000

Paid-In Capital in Excess of Par-Preferred Stock 120,000

Common Stock, $25 par (700,000 shares authorized, 270,000 shares issued) 6,750,000

Paid-In Capital in Excess of Par-Common Stock 880,000

Retained Earnings 18,020,000

During the year, the corporation completed a number of transactions affecting the stockholders' equity. They are summarized as follows:

Issued 70,000 shares of common stock at $32, receiving cash.

Issued 8,000 shares of preferred 2% stock at $66.

Purchased 42,000 shares of treasury common for $28 per share.

Sold 21,000 shares of treasury common for $31 per share.

Sold 14,000 shares of treasury common for $26 per share.

Declared cash dividends of $1.00 per share on preferred stock and $0.10 per share on common stock.

Paid the cash dividends.

Required - Journalize the entries to record the transactions. If an amount box does not require an entry, leave it blank.

a. Issued 70,000 shares of common stock at $32, receiving cash.

b. Issued 8,000 shares of preferred 2% stock at $66.

c. Purchased 42,000 shares of treasury common for $28 per share.

d. Sold 21,000 shares of treasury common for $31 per share.

e. Sold 14,000 shares of treasury common for $26 per share.

f. Declared cash dividends of $1.00 per share on preferred stock and $0.10 per share on common stock.

g. Paid the cash dividends.

Question 4 - Entries for Selected Corporate Transactions - Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders' equity accounts of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows:

Common Stock, $10 stated value (750,000 shares authorized, 500,000 shares issued) $5,000,000

Paid-In Capital in Excess of Stated Value-Common Stock 950,000

Retained Earnings 11,350,000

Treasury Stock (50,000 shares, at a cost of $15 per share) 750,000

The following selected transactions occurred during the year:

Jan. 22. Paid cash dividends of $0.13 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $58,500.

Apr. 10. Issued 95,000 shares of common stock for $18 per share.

June 6. Sold all of the treasury stock for $900,000.

July 5. Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $20 per share.

Aug. 15. Issued the certificates for the dividend declared on July 5.

Nov. 23. Purchased 31,000 shares of treasury stock for $620,000.

Dec. 28. Declared a $0.16-per-share dividend on common stock.

Dec. 31. Closed the two dividends accounts to Retained Earnings.

Required - 1. The January 1 balances have been entered in T accounts for the stockholders' equity accounts. Record the above transactions in the T accounts and provide the December 31 balance where appropriate.

2. Journalize the entries to record the transactions. If an amount box does not require an entry, leave it blank.

Jan. 22. Paid cash dividends of $0.13 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $58,500.

Apr. 10. Issued 95,000 shares of common stock for $18.

June 6. Sold all of the treasury stock for $900,000.

July 5. Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $20 per share.

Aug. 15. Issued the certificates for the dividend declared on July 5.

Nov. 23. Purchased 31,000 shares of treasury stock for $620,000.

Dec. 28. Declared a $0.16-per-share dividend on common stock.

Dec. 31. Closed the two dividends accounts to Retained Earnings.

3. Prepare a retained earnings statement for the year ended December 31, 20Y5. Assume that Morrow Enterprises Inc. had net income for the year ended December 31, 20Y5, of $11,804,000.

4. Prepare the Stockholders' Equity section of the December 31, 20Y5, balance sheet.

Question 5 - Entries for Selected Corporate Transactions - Selected transactions completed by ATV Discount Corporation during the current fiscal year are as follows:

Journalize the transactions. If no entry is required, select "No Entry Required" from the dropdown box and leave the amount boxes blank. If an amount box does not require an entry, leave it blank.

Jan. 5. Split the common stock 4 for 1 and reduced the par from $160 to $40 per share. After the split, there were 620,000 common shares outstanding.

Mar. 10. Purchased 50,000 shares of the corporation's own common stock at $43, recording the stock at cost.

Apr. 30. Declared semiannual dividends of $2.80 on 55,000 shares of preferred stock and $0.24 on the common stock to stockholders of record on May 15, payable on June 15.

June 15. Paid the cash dividends.

Aug. 20. Sold 36,000 shares of treasury stock at $49, receiving cash.

Oct. 15. Declared semiannual dividends of $2.80 on the preferred stock and $0.30 on the common stock (before the stock dividend).

Oct. 15. A 2% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $51.

Dec. 19. Paid the cash dividends.

Dec. 19. Issued the certificates for the common stock dividend.

Question 6 - Selected Dividend Transactions, Stock Split - Selected transactions completed by Canyon Ferry Boating Corporation during the current fiscal year are as follows:

Journalize the transactions.

If no entry is required, type "No Entry Required" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank.

Jan. 8. Split the common stock 3 for 1 and reduced the par from $90 to $30 per share. After the split, there were 141,000 common shares outstanding.

Apr. 30. Declared semiannual dividends of $1.40 on 10,000 shares of preferred stock and $0.12 on the common stock payable on July 1.

July 1. Paid the cash dividends.

Oct. 31. Declared semiannual dividends of $1.40 on the preferred stock and $0.09 on the common stock (before the stock dividend). In addition, a 3% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $54.

Dec. 31. Paid the cash dividends and issued the certificates for the common stock dividend.

Question 7 - Treasury Stock Transactions - Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water Inc. reacquired 2,600 shares of its common stock at $61 per share. On September 6, Biscayne Bay Water Inc. sold 2,100 of the reacquired shares at $64 per share. The remaining 500 shares were sold at $57 per share on November 30.

a. Journalize the transactions of May 14, September 6, and November 30. 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?