Treasury shares were accounted for using the cost method

Assignment Help Financial Accounting
Reference no: EM13795305

Task Corporation had the following stockholders’ equity account balances at December 31, 20x4:

Common Stock                                       $   7,875,000

Paid-in Capital in Excess of Par                    15,750,000

Paid-in Capital Employee Stock Options             400,000

Retained Earnings                                       16,445,000

Treasury Stock                                                750,000

Transactions and other information related to stockholders’ equity accounts were as follows:

As of December 31, 20x4, Trask had 4,000,000 authorized shares of $5 par value common stock – 1,575,000 shares had been issued, of this 75,000 were held in the treasury. The treasury shares were accounted for using the cost method.

On January 1, 20x5, Trask issued 5,000 shares of $100 par value, 6% cumulative preferred stock at par in exchange for legal fees valued at $522,000.

On March 1, 20x5, Task formally retired 25,000 of the treasury shares. The shares were originally issued for $15 per share and had been reacquired on September 25, 2004 for $10 per share.

Trask owned shares of Harbor, Inc. common stock that was purchased during 20x4 for $600,000. On March 5, 20x5, Trask declared a property dividend to distribute all of the Harbor shares to common stockholders of record on April 16, 20x5. The market value of the Harbor stock on March 5, 20x5 was $764,000. The property dividend was distributed on April 29, 20x5.

On January 2, 20x3, Trask granted stock options to employees to purchase 200,000 shares of the company’s common stock at $12 per share, which was the market price on that date. The market price of the options on the grant date was $2 per option. The options are exercisable within a three year period, beginning January 1, 20x5. On July 1, 20x5, employees exercised 150,000 options when the market value of the stock was $25 per share.

On October 27, 20x5, Trask declared a two-for-one stock split on its common stock and reduced the per share par value accordingly. Trask stockholders of record received one additional share for each share owned.

On December 12, 20x5, Trask declared the yearly cash dividend on preferred stock, payable on January 11, 20x6.

On January 16, 20x6 before the accounting records are closed for 20x5, Trask became aware of the fact that depreciation was understated by $350,000 for the year ended December 31, 20x4. The after tax effect on net income was $245,000.

Net income for 20x5 was $2,400,000.

The average price of a share of Trask common stock was $22 per share.

The price of a share of Trask common stock was $24 at year end.

Required:

Prepare all journal entries required to record the above information during 20x5.

Prepare Trask’s statement of retained earnings for the year ended December 31, 20x5.

Prepare the stockholders’ equity section of Trask’s balance sheet at December 31, 20x5.

Compute earnings per share for the year 20x5.

Reference no: EM13795305

Questions Cloud

Annual pretax cost savings-production efficiency : Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $854,400 is estimated to result in $284,800 in annual pretax cost savings. If the shop's tax rate is 30 percent and its discoun..
Initial investment in net working capital : Alson Enterprises needs someone to supply it with 168,000 cartons of machine screws per year to support its manufacturing needs over the next 4 years, and you've decided to bid on the contract. It will cost you $873,600 to install the equipment neces..
Common steps companies take-formulating business strategy : What is business strategy and how is it defined? When it comes to Business strategy we often use an acronym SCA as an end state to our strategy. What does SCA stand for and how do we establish it? What are the common steps companies take when formula..
Authoritative bodies responsible-financial reporting : Identify the authoritative bodies responsible for setting financial reporting standards for State, local governments, the federal government and for not-for-profit organizations.
Treasury shares were accounted for using the cost method : As of December 31, 20x4, Trask had 4,000,000 authorized shares of $5 par value common stock – 1,575,000 shares had been issued, of this 75,000 were held in the treasury. The treasury shares were accounted for using the cost method.
Reinvested continuously at an annual rate of return : For the 2009 fiscal year, Lowe's Companies, Inc. reported an annual net income of $48,230,000. Assume the income can be reinvested continuously at an annual rate of return of 5.8% compounded continuously and that Lowe's will maintain this annual net ..
Non-contributory defined benefit pension plan : On January 1, x1, Brown Corp initiated a non-contributory defined benefit pension plan for all six employees in its word processing department. The plan benefit formula provides that each year of service earns each employee an annual retirement benef..
Prepare trasks statement of retained earnings for the year : As of December 31, 20x4, Trask had 4,000,000 authorized shares of $5 par value common stock – 1,575,000 shares had been issued, of this 75,000 were held in the treasury. The treasury shares were accounted for using the cost method. Prepare all journa..
What is net income attributable to no controlling interest : Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2013, for $420,000 in cash. Lowly's book value at that date was reported as $600,000 and the fair value of the noncontrolling interest was assessed at $280,000. What worksh..

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd