Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water Inc

Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year, Biscayne Bay Water Inc. reacquired 23,500 shares of its common stock at $75 per share. On September 6, Biscayne Bay Water Inc. sold 14,000 of the reacquired shares at $81 per share. The remaining 9,500 shares were sold at $72 per share on November 30.

a. Journalize the transactions of May 14, September 6, and November 30.
b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?
c. Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the balance sheet?
d. For what reasons might Biscayne Bay Water Inc. have purchased the treasury stock?


Answer:













a. May 14 Treasury Stock (23,500 shares × $75) 1,762,500
Cash 1,762,500
Sept. 6 Cash (14,000 shares × $81) 1,134,000
Treasury Stock (14,000 shares × $75) 1,050,000
Paid-In Capital from Sale of Treasury
Stock [14,000 shares × ($81 – $75)] 84,000
Nov. 30 Cash (9,500 shares × $72) 684,000
Paid-In Capital from Sale of Treasury
Stock [9,500 shares × ($75 – $72)] 28,500
Treasury Stock (9,500 shares × $75) 712,500





b. $55,500 ($84,000 – $28,500) credit
c. Stockholders’ equity section
d. Biscayne Bay Water Inc. may have purchased the stock to support the market price
of the stock, to provide shares for resale to employees, or for reissuance to employees as a bonus according to stock purchase agreements.

The following accounts and their balances were selected from the unadjusted trial balance of Point Loma Group Inc., a freight forwarder,

The following accounts and their balances were selected from the unadjusted trial balance of Point Loma Group Inc., a freight forwarder, at October 31, the end of the current fiscal year:








Common Stock, no par, $14 stated value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,480,000
Paid-In Capital from Sale of Treasury Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000
Paid-In Capital in Excess of Par—Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 210,000
Paid-In Capital in Excess of Stated Value—Common Stock . . . . . . . . . . . . . . . . 480,000
Preferred 2% Stock, $120 par. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,400,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,500,000


Prepare the Paid-In Capital portion of the Stockholders’ Equity section of the balance sheet using Method 1 of Exhibit 4. There are 375,000 shares of common stock authorized and 85,000 shares of preferred stock authorized.


Answer:















Stockholders’ Equity
Paid-in capital:
Preferred 2% stock, $120 par
(85,000 shares authorized,
70,000 shares issued) $8,400,000
Excess of issue price over par 210,000 $ 8,610,000
Common stock, no par, $14 stated
value (375,000 shares authorized,
320,000 shares issued) $4,480,000
Excess of issue price over par 480,000 4,960,000
From sale of treasury stock 45,000
Total paid-in capital $13,615,000

The following accounts and their balances appear in the ledger of Goodale Properties Inc. on June 30 of the current year:

The following accounts and their balances appear in the ledger of Goodale Properties Inc. on June 30 of the current year:










Common Stock, $45 par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,060,000
Paid-In Capital from Sale of Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,000
Paid-In Capital in Excess of Par—Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 272,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,553,000
Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324,000


Prepare the Stockholders’ Equity section of the balance sheet as of June 30. Eighty thousand shares of common stock are authorized, and 9,000 shares have been reacquired.


Answer:















Stockholders’ Equity
Paid-in capital:
Common stock, $45 par
(80,000 shares authorized,
68,000 shares issued) $3,060,000
Excess of issue price over par 272,000 $ 3,332,000
From sale of treasury stock 115,000
Total paid-in capital $ 3,447,000
Retained earnings 20,553,000
Total $24,000,000
Deduct treasury stock
(9,000 shares at cost) 324,000
Total stockholders’ equity $23,676,000

Specialty Auto Racing Inc. retails racing products for BMWs, Porsches, and Ferraris. The following accounts and their balances appear in the ledger of Specialty Auto Racing Inc. on July 31, the end of the current year:












Common Stock, $36 par. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,080,000
Paid-In Capital from Sale of Treasury Stock—Common. . . . . . . . . . . . . . . . . . . . 340,000
Paid-In Capital in Excess of Par—Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 420,000
Paid-In Capital in Excess of Par—Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 384,000
Preferred 1% Stock, $150 par. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,200,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,684,000
Treasury Stock—Common. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,008,000


Fifty thousand shares of preferred and 300,000 shares of common stock are authorized. There are 24,000 shares of common stock held as treasury stock.

Prepare the Stockholders’ Equity section of the balance sheet as of July 31, the end of the current year using Method 1 of Exhibit 4.


Answer:


















Stockholders’ Equity
Paid-in capital:
Preferred 1% stock, $150 par
(50,000 shares authorized,
48,000 shares issued) $ 7,200,000
Excess of issue price over par 384,000 $ 7,584,000
Common stock, $36 par
(300,000 shares authorized,
280,000 shares issued) $10,080,000
Excess of issue price over par 420,000 10,500,000
From sale of treasury stock 340,000
Total paid-in capital $18,424,000
Retained earnings 71,684,000
Total $90,108,000
Deduct treasury common stock
(24,000 shares at cost) 1,008,000
Total stockholders’ equity $89,100,000

Atlas Pumps Corporation, a manufacturer of industrial pumps, reports the following results for the year ended January 31, 2014

Atlas Pumps Corporation, a manufacturer of industrial pumps, reports the following results for the year ended January 31, 2014:








Retained earnings, February 1, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,110,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,330,000
Cash dividends declared. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000
Stock dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000


Prepare a retained earnings statement for the fiscal year ended January 31, 2014.


Answer:










ATLAS PUMPS CORPORATION
Retained Earnings Statement
For the Year Ended January 31, 2014
Retained earnings, February 1, 2013 $48,110,000
Net income $9,330,000
Less dividends declared 2,400,000
Increase in retained earnings 6,930,000
Retained earnings, January 31, 2014 $55,040,000

List the errors in the following Stockholders’ Equity section of the balance sheet prepared as of the end of the current year

List the errors in the following Stockholders’ Equity section of the balance sheet prepared as of the end of the current year:
















Stockholders’ Equity
Paid-in capital:
Preferred 2% stock, $80 par
(125,000 shares authorized and issued) . . . . . . . . . . . . . . . $10,000,000
Excess of issue price over par . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 $ 10,500,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,700,000
Treasury stock (75,000 shares at cost) . . . . . . . . . . . . . . . . . . . . 1,755,000
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,000
Total paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 109,385,000
Common stock, $20 par (1,000,000 shares
authorized, 825,000 shares issued) . . . . . . . . . . . . . . . . . . . 17,655,000
Organizing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $127,340,000




Answer:
1. Retained earnings is not part of paid-in capital.
2. The cost of treasury stock should be deducted from the total stockholders’ equity.
3. Dividends payable should be included as part of current liabilities and not as part of stockholders’ equity.
4. Common stock should be included as part of paid-in capital.
5. The amount of shares of common stock issued of 825,000 times the par value per share of $20 should be extended as $16,500,000, not $17,655,000. The difference, $1,155,000, probably represents paid-in capital in excess of par.
6. Organizing costs should be expensed as Organizational Expenses when incurred and not included as a part of stockholders’ equity. One possible corrected Stockholders’ Equity section of the balance sheet using Method 1 of Exhibit 4 is as follows:

















Stockholders’ Equity
Paid-in capital:
Preferred 2% stock, $80 par (125,000
shares authorized and issued) $10,000,000
Excess of issue price over par 500,000 $ 10,500,000
Common stock, $20 par (1,000,000 shares
authorized, 825,000 shares issued) $16,500,000
Excess of issue price over par 1,155,000 17,655,000
Total paid-in capital $ 28,155,000
Retained earnings* 96,400,000
Total $124,555,000
Deduct treasury stock (75,000 shares at cost) 1,755,000
Total stockholders’ equity $122,800,000


* $96,700,000 – $300,000. Since the organizing costs should have been expensed, the retained earnings should be $300,000 less.




Ironhaus Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Southwest. Ironhaus Restaurant Corporation, which had 40,000 shares of common stock outstanding, declared a 4-for-1 stock split.

a. What will be the number of shares outstanding after the split?

b. If the common stock had a market price of $300 per share before the stock split, what would be an approximate market price per share after the split?


Answer:
a. 160,000 shares (40,000 × 4)
b. $75 per share ($300 ÷ 4)

The stockholders’ equity T accounts of I-Cards Inc. for the current fiscal year ended December 31, 2014, are as follows. Prepare a statement of stockholders’ equity

The stockholders’ equity T accounts of I-Cards Inc. for the current fiscal year ended December 31, 2014, are as follows. Prepare a statement of stockholders’ equity for the fiscal year ended December 31, 2014.

























COMMON STOCK
Jan. 1 Balance 4,800,000
Apr. 14 Issued
30,000 shares 1,200,000
Dec. 31 Balance 6,000,000
PAID-IN CAPITAL IN EXCESS OF PAR
Jan. 1 Balance 960,000
Apr. 14 Issued
30,000 shares 300,000
Dec. 31 Balance 1,260,000
TREASURY STOCK
Aug. 7 Purchased
12,000 shares 552,000
RETAINED EARNINGS
Mar. 31 Dividend 69,000 Jan. 1 Balance 11,375,000
June 30 Dividend 69,000 Dec. 31 Closing
(net income) Sept. 30 Dividend 69,000 3,780,000
Dec. 31 Dividend 69,000 Dec. 31 Balance 14,879,000









Answer:

















I-CARDS INC.
Statement of Stockholders’ Equity
For the Year Ended December 31, 2014
Common
Stock,
$40 par
Paid-In
Capital in
Excess
of Par
Treasury
Stock
Retained
Earnings Total
Balance, Jan. 1, 2014 $4,800,000 $ 960,000 — $11,375,000 $17,135,000
Issued 30,000 shares
of common stock 1,200,000 300,000 1,500,000
Purchased 12,000 shares
as treasury stock $(552,000) (552,000)
Net income 3,780,000 3,780,000
Dividends (276,000) (276,000)
Balance, Dec. 31, 2014 $6,000,000 $1,260,000 $(552,000) $14,879,000 $21,587,00