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 |