When Common Stock Has a Par Value ACC 230 Final Review 1 Bellingham Corporation has

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```					                                          ACC 230
Final Review

1. Bellingham Corporation has the following stockholders’ equity balances at December 31,
2008:

Common Stock, \$1 par                 \$ 3,500
Paid-in Capital in Excess of Par      24,500
Retained Earnings                     62,500
Total                             \$90,500

Calculate book value per share.

2. The corporate charter of Hunter Corporation allows the issuance of a maximum of
2,500,000 shares of \$1 par value common stock. During its first three years of
operation, Hunter issued 1,500,000 shares at \$15 per share. It later acquired 30,000
of these shares as treasury stock for \$25 per share.

Based on the above information, answer the following questions:

(a) How many shares were authorized?

(b) How many shares were issued?

(c) How many shares are outstanding?

(d) What is the balance of the Common Stock account?

(e) What is the balance of the Treasury Stock account?
3.    The following items were shown on the balance sheet of Herman Corporation on
December 31, 2008:

Stockholders’ Equity
Paid-In Capital
Capital Stock
Common stock, \$5 par value, 360,000 shares authorized;
______ shares issued and ______ outstanding........................................\$1,650,000
In excess of par value...............................................................................................          165,000
Total paid-in capital ....................................................................................................   1,815,000

Retained Earnings......................................................................................................................... 750,000
Total paid-in capital and retained earnings.......................................................... 2,565,000
Less: Treasury stock (15,000 shares) ........................................................................... (180,000)
Total stockholders' equity ............................................................................................. \$2,385,000

Complete the following statements and show your computations.
(a) The number of shares of common stock issued was _______________.

(b) The number of shares of common stock outstanding was ____________.

(c) The sales price of the common stock when issued was \$____________.

(d) The cost per share of the treasury stock was \$_______________.

(e) The average issue price of the common stock was \$______________.

(f) Assuming that 25% of the treasury stock is sold at \$20 per share, the balance in
the Treasury Stock account would be \$_______________.
4. The following information is available for Stewart Corporation:
Common Stock (\$10 par)                                     \$1,000,000
Paid-in Capital in Excess of Par Value—Preferred              180,000
Paid-in Capital in Excess of Stated Value—Common              600,000
Preferred Stock                                               550,000
Retained Earnings                                             750,000
Treasury Stock—Common                                          50,000

Based on the preceding information, calculate each of the following:
(a)   Total paid-in capital.

(b)      Total stockholders' equity.

5. Place each of the items listed below in the appropriate subdivision of the stockholders'
equity section of a balance sheet.
Common stock, \$10 stated value
Retained earnings
8% Preferred stock, \$100 par value
Paid-in capital in excess of par value
Paid-in capital in excess of stated value
Treasury stock
Paid-in capital from treasury stock

Stockholders' equity
Paid-in capital
Capital stock

Total paid-in capital
Retained earnings
Total paid-in capital and retained earnings

Total stockholders' equity
6. The following information is available for Gordon Corporation:

Common stock (\$5 par)                          \$500,000
Paid-in capital in excess of par—common         200,000
Retained earnings                               360,000
Treasury stock                                   70,000
Common shares issued                      100,000 shares
Common shares outstanding                  90,000 shares

Based on the preceding information, calculate the book value per share.

7.    On December 31, 2008, Colaw Company reports the following amounts in its
stockholders' equity section:
Common stock                                     \$2,400,000
Paid-in capital in excess of stated value—common    900,000
Retained earnings                                  1,180,000
Treasury stock—common                                180,000

The common stock has a stated value of \$10 per share. One million shares of common
stock are authorized and 40,000 shares are held in the treasury.
Compute the book value per share of common stock.

8. Devons Company has 24,000 shares of \$1 par common stock issued and outstanding. The
company also has 2,000 shares of \$100 par 3% cumulative preferred stock outstanding.
The company did not pay the preferred dividends in 2007 or 2008. What amount of
dividends must the company pay the preferred shareholders in 2009 if they wish to
pay the common stockholders a dividend?
9. The following information is available for Wheeler Corporation

2008          2007
Average common stockholders’ equity             \$1,500,000    \$1,000,000
Average total stockholders’ equity               2,000,000     1,500,000
Common dividends declared and paid                  72,000        50,000
Preferred dividends declared and paid               30,000        30,000
Net income                                         300,000       250,000

Compute the return on common stockholders’ equity ratio for both years. Briefly

10.    Derek Corporation was organized on January 1, 2007. During its first year, the
corporation issued 40,000 shares of \$5 par value preferred stock and 400,000 shares
of \$1 par value common stock. At December 31, the company declared the following
cash dividends:

2007                \$10,000
2008                \$30,000
2009                \$70,000

(a) Show the allocation of dividends to each class of stock, assuming the preferred stock
dividend is 6% and not cumulative.

(b) Show the allocation of dividends to each class of stock, assuming the preferred stock
dividend is 8% and cumulative.
11. The following information is available for Wenger Corporation:

Beginning stockholders' equity                  \$700,000
Dividends paid to common stockholders             50,000
Dividends paid to preferred stockholders          30,000
Ending stockholders' equity                      800,000
Net income                                       165,000

Based on the preceding information, calculate return on common stockholders' equity.

12. The following information is available for Vincent Corporation:

Dividends paid to common stockholders      \$ 45,000
Dividends paid to preferred stockholders     20,000
Net income                                  145,000
Weighted average common shares outstanding  100,000

Compute the earnings per share of common stock.

13. Franco Corporation reports the following selected financial statement information at
December 31, 2008:
Total Assets                        \$89,000
Total Liabilities                     65,000
Net Income                            27,000
Interest Income                        1,600
Interest Expense                         900
Tax Expense                              300

Calculate the debt to total assets and times interest earned ratios.
14. Selected transactions for the Eldon Company are listed below.
1.      Collected accounts receivable.

2.      Declared and paid dividends on common stock.

3.      Sold long-term investments for cash.

4.      Issued stock for equipment.

5.      Repaid five year note payable.

6.      Paid employee wages.

7.      Converted bonds payable to common stock.

8.      Acquired long-term investment with cash.

9.      Sold buildings and equipment for cash.

10.     Sold merchandise to customers.

Classify each transaction as either (a) an operating activity, (b) an investing activity,
(c) a financing activity, or (d) a noncash investing and financing activity.

15. Daimler Enterprises reported cash flow from operations of \$342,000. The company
made capital expenditures of \$112,000 and paid dividends of \$34,000. Compute free
cash flow.

16.     Schick Company reported cost of goods sold of \$192,000 on its 2008 income
statement. The company’s beginning inventory was \$35,000. The ending inventory was
valued at \$40,000. The Accounts Payable balance at January 1 was \$25,000. The
December 31 balance in Accounts Payable was \$22,000. Compute cash payments to
suppliers.
17. Selected transactions of Eller Company are listed below.
1.      Common stock is sold for cash above par value.

2.      Bonds payable are issued for cash at a discount.

3.      Interest receivable on a short-term note receivable is collected.

4.      Land is sold for cash at book value.

5.      Accounts payable are paid in cash.

6.      Equipment is purchased by signing a 3-year, 10% note payable.

7.      Cash dividends on common stock are declared and paid.

8.      100 shares of XYZ common stock are purchased for cash.

9.      Merchandise is sold to customers for cash.

10.     Bonds payable are converted into common stock.

Classify each transaction as either (a) an operating activity, (b) an investing activity,
(c) a financing activity, or (d) a noncash investing and financing activity.

18. The following information is available for Visser Corporation:
Capital expenditures             \$115,000
Cash dividends                     65,000
Cash provided by operations       200,000
Net income                        130,000
Sales                             500,000

Compute Visser Corporation's free cash flow.

19. Dolan Company's income statement showed revenues of \$250,000 and operating
expenses of \$160,000. Accounts receivable decreased by \$60,000 and accounts
payable increased by \$40,000 during the year. Compute cash receipts from customers
20. The general ledger of Lopez Company provides the following information:
End of Year       Beginning of Year
Accounts Receivable                \$ 55,000             \$ 94,000
Inventory                            350,000              210,000
Accounts Payable                      40,000               65,000
The company's net sales for the year was \$2,100,000 and cost of goods sold amounted
to \$1,500,000.
Compute the following:
(a) Cash receipts from customers.

(b) Cash payments to suppliers.

21. If Parthenon Company had net income of \$672,300 in 2009 and it experienced a 20%
increase in net income over 2008, what was its 2008 net income?

22. Using the following operating data for Manchac Corporation, illustrate horizontal
analysis.
2008           2007
Net sales                \$350,000       \$320,000
Cost of goods sold        200,000        180,000
Operating expenses        120,000        100,000
Net income                 30,000         40,000

23. Using the data presented for Manchac Company in BE 166, prepare a schedule showing
a vertical analysis for 2008.
24.    Using these data from the comparative balance sheet of Luca Company, perform
vertical analysis.

December 31, 2009       December 31, 2008
Accounts receivable           \$ 500,000              \$ 400,000
Inventory                        780,000                600,000
Total assets                   3,220,000              2,800,000

25. Selected financial statement data for Meyer Company are presented below.
12/31/08
Cash                                            \$ 10,000
Short-term investments                            15,000
Accounts receivable                               60,000
Inventories                                       75,000
Total current liabilities                        110,000

Compute the following ratios at December 31, 2008:
(a)   Current.

(b)   Acid-test.

26. Breaktown Company had net income of \$152,000 and net sales of \$625,000 in 2008.
The company’s total assets for 2007/2008 averaged \$3,900,000. Its common
stockholders’ equity for the period averaged \$2,340,000.
Calculate:
(a) profit margin

(b) return on assets

(c) return on common stockholders’ equity.
27. Eaton Corporation had net income of \$6,000,000 in 2007. Using 2007 as the base
year, net income decreased by 70% in 2008 and increased by 140% in 2009. Compute
the net income reported by Eaton Corporation for 2008 and 2009.

28. The following items were taken from the financial statements of Ritz, Inc., over a
four-year period:
Item              2010         2009           2008        2007
Net Sales      \$800,000     \$700,000       \$550,000    \$500,000
Cost of Goods Sold       560,000      500,000        420,000     400,000
Gross Profit     \$240,000     \$200,000       \$130,000    \$100,000

Using horizontal analysis and 2007 as the base year, compute the trend percenta ges
for net sales, cost of goods sold, and gross profit. Explain whether the trends are
favorable or unfavorable for each item.

29. Using the following selected items from the comparative balance sheet of Anders
Company, illustrate horizontal and vertical analysis.
December 31, 2009     December 31, 2008
Accounts Receivable           \$ 900,000            \$ 600,000
Inventory                        975,000              750,000
Total Assets                   4,000,000            2,500,000

30. Operating data for Manning Corporation are presented below.
2008
Net sales                   \$500,000
Cost of goods sold           340,000
Operating expenses           120,000
Net income                    40,000

Prepare a schedule showing a vertical analysis for 2008.
31. Selected information from the comparative financial statements of Fryman Company
for the year ended December 31, appears below:
2009               2008
Accounts receivable (net)          \$ 180,000          \$200,000
Inventory                             140,000           160,000
Total assets                        1,200,000          800,000
Current liabilities                   140,000           110,000
Long-term debt                        340,000          300,000
Net credit sales                    1,520,000          700,000
Cost of goods sold                    750,000          530,000
Interest expense                       40,000            25,000
Income tax expense                     60,000            29,000
Net income                            160,000            85,000

Answer the following questions relating to the year ended December 31, 2009. Show
computations.
1.      Inventory turnover for 2009 is __________.

2.      Times interest earned in 2009 is __________.

3.      The debt to total assets ratio for 2009 is __________.
32. The income statement for Stoval Company for the year ended December 31, 2008
appears below.
Sales                                 \$610,000
Cost of goods sold                     380,000
Gross profit                           230,000
Expenses                               170,000*
Net income                            \$ 60,000

*Includes \$30,000 of interest expense and \$18,000 of income tax expense.

1. Common stock outstanding on January 1, 2008 was 40,000 shares. On July 1, 2008,
10,000 more shares were issued.
2. The market price of Stoval's stock was \$15 at the end of 2008.
3. Cash dividends of \$30,000 were paid, \$6,000 of which were paid to preferred
stockholders.
Compute the following ratios for 2008:
(a) earnings per share.

(b) price-earnings.

(c)   times interest earned.

Solutions

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