## Practice Problems: Corporations

Complete the demo problems, and self test true/false and multiple choice questions. Check your answers at the end after you finish.

### Demonstration problem

#### Solution

Solution to demonstration problem A

a.

 Retained earnings (or dividends) (-SE) 15,000 Dividends payable (+L) 15,000 To record declaration of a cash dividend.

b.

 Retained earnings (or stock dividends) (1,000 shares x $185) (-SE) 185,000 Stock dividend distributable – Common (1,000 shares x$150) (+L) 150,000 Paid-in capital – Stock dividends(+SE) 35,000 To record declaration of a small stock dividend (10%).

c.

 Retained earnings (or stock dividends) (4,000 shares x $150) (-SE) 600,000 Stock dividend distributable – Common (+L) 600,000 To record declaration of a large stock dividend (40%). Solution to demonstration problem B 1.  Treasury stock (-SE) 20,600 Cash (-A) 20,600 Acquired 200 shares at$20,600 ($103 per share). 2.  Cash (50 shares x$110) (+A) 5,500 Treasury stock – Common (50 shares x $103) (+SE) 5,150 Paid-in capital – common treasury stock transactions (+SE) 350 Reissued 50 shares at$110 per share; cost is $5,150 350 3.  Cash (70 shares x$95) (+A) 6,650 Paid-in capital – Common treasury stock transactions (50 shares x $7) (-SE) 350 Retained earnings (-SE) 210 Treasury stock – common (70 shares x$103) (+SE) 7,210 Reissued 70 shares at $95 per share; cost is$7,210.

4. Stockholders donated 100 shares of common stock to the company. (Only memo entry is made.)

5.

 Cash (+A) 9,000 Paid-in capital – Donations (100 shares x $90) (+SE) 9,000 Reissued donated shares at$90 per share.

Solution to demonstration problem C

Nexis Corporation
Partial balance sheet
2010 December 31

 Stockholders' equity: Paid-in capital: Preferred stock – 8%, par value $200; 1,000 shares authorized, issued, and outstanding$200,000 Common stock – no par value, stated value of $20 per share; 100,000 shares authorized, issued, and outstanding 2,000,000 Paid-in capital from donation of plant site 100,000 Paid-in capital in excess of par value – preferred 8,000 Total paid-in capital$2,308,000 Retained earnings 570,000 Total stockholders' equity \$2,878,000