Practices in Financial Accounting Exercise Corporation/Equity

Practices in Financial Accounting

Exercise
Corporation/Equity

1. A company had a beginning balance in retained earnings of $43,000. It had net income of
$6,000 and paid out cash dividends of $5,625 in the current period. The ending balance in
retained earnings equals:

A. $54,625.
B. $42,625.
C. $11,625.
D. $43,375.
E. $49,000.
2. Shamrock Company had net income of $30,000. The weighted-average ordinary shares
outstanding were 8,000. The company declared a $2,700 dividend on its noncumulative,
nonparticipating preference shares. There were no other share transactions. The company's
earnings per share is:
A. $2.87.
B. $2.73.
C. $3.41.
D. $3.16.
E. $3.75.
3. Dividend yield is the percent of cash dividends paid to ordinary shareholders relative to
the:
A. Ordinary share's market value.

B. Earnings per share.
C. Investors' purchase price of the.
D. Amount of retained earnings.
E. Amount of cash.
4. A corporation sold 14,000 $10 par value ordinary shares at a cash price of $13 per share.
The entry to record this transaction would include:
A. A debit to Share Premium-Ordinary for $42,000.

B. A debit to Cash for $140,000.
C. A credit to Share Capital-Ordinary for $182,000.
D. A credit to Share Capital-Ordinary for $140,000.
E. A credit to Share Premium-Ordinary for $182,000.
5. A corporation issued 6,000 $10 par value ordinary shares in exchange for land that has a
market value of $84,000. The entry to record this transaction would include:
A. A debit to Share Capital-Ordinary for $60,000.

B. A debit to Land for $60,000.
C. A credit to Land for $60,000.
D. A credit to Share Premium-Ordinary for $24,000.
E. A credit to Share Capital-Ordinary for $84,000.
6. A company is authorized to issue 50,000 $50 par value, 8%, cumulative, fully participating
preference shares, and 750,000 $5 par value ordinary shares. Prepare journal entries to record
the following selected transactions that occurred during the company's first year of
operations:
7. A company reports the following shareholders' equity:
Compute the
(1) number of ordinary shares outstanding and
(2) book value per ordinary share.
QUESTION 1
Daris Corporation is authorized to issue 1,000,000 shares of $5 par value common stock.
During 2018, its first year of operation, the company has the following stock transactions.
Jan. 1 Paid the state RM2,000 for incorporation fees.
Jan. 15 Issued 500,000 shares of stock at RM7 per share.
Jan. 30 Attorneys for the company accepted 500 shares of common stock as payment for
legal services rendered in helping the company incorporate. The legal services are
estimated to have a value of RM8,000.
July 2 Issued 100,000 shares of stock for land. The land had an asking price of
RM900,000. The stock is currently selling on a national exchange at RM8 per
share.
Sept. 5 Purchased 15,000 shares of common stock for the treasury at RM10 per share.
Dec. 6 Sold 11,000 shares of the treasury stock at RM11 per share.
Required:
Journalize the transactions for Daris Corporation.
dr incorporation fees 2,000

cr cash 2,000
dr cash(500,000x7) 3,500,000
cr common stock 3,500,000
dr incorporation fees 8,000

cr common stock(500x5) 2,500
paid in capital 5,500
dr land(100,000x8) 800,000
cr common stock(100,000x5) 500,000
dr treasury shares(15,000x10) 150,000

cr cash 150,000
dr cash 121,000
cr treasury stock from common stock(11,000x10) 110,000
QUESTION 2
The following selected transactions took place during the current year for a company:
(a) Prepare the journal entries for these transactions.

(b) If Retained Earnings had a $75,000 credit balance on January 1, calculate its year-end
balance as of December 31.
QUESTION 3
A corporation had the following shares outstanding when the company's board of directors
declared a $95,000 cash dividend in the current year:
Required:
Allocate the cash dividend between the preference and ordinary shareholders assuming the
preference shares are noncumulative and nonparticipating.
QUESTION 4
Purnama Merindu reports the following components of shareholders’ equity on December 31,
2016
Share Capital-Ordinary, RM10 par value, 50,000 shares authorized, RM200,000

20,000 shares issued and outstanding
Share Premium, Ordinary 30,000
Retained Earnings 135,000
Total Shareholders’ equity 365,000
In year 2017, the following transactions affected its shareholders’ equity accounts.
Jan 1 Purchased 2,000 of its own shares at RM20.00 cash.

Jan 5 Directors declared a RM2 per share cash dividend payable on Feb 28 to the Feb 5 shareholders of
record
Feb 28 Paid the dividend declared on January 5
July 6 Sold 750 of its treasury shares at RM24 cash per share.
Aug 22 Sold 1,250 of its treasury shares at RM17 cash per share.
Sept 5 Directors declared a RM2 per share cash dividend payable on October 28 to the September 25
shareholders record.
Oct 28 Paid the dividend declared on September 5
Dec 31 Closed the RM194,000 credit balance (from net income) in the Income Summary account to
Retained Earning.
Required:
1. Prepare journal entries to record each of these transactions for 2017.

2. Prepare a statement of changes in equity for the year ended December 31, 2017.

Practices in Financial Accounting Exercise Corporation/Equity

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Practices in Financial Accounting

A. Ordinary share's market value.

A. A debit to Share Premium-Ordinary for $42,000.

A. A debit to Share Capital-Ordinary for $60,000.

7. A company reports the following shareholders' equity:

(1) number of ordinary shares outstanding and

(2) book value per ordinary share.

dr incorporation fees 2,000

dr incorporation fees 8,000

dr treasury shares(15,000x10) 150,000

(a) Prepare the journal entries for these transactions.

Share Capital-Ordinary, RM10 par value, 50,000 shares authorized, RM200,000

Jan 1 Purchased 2,000 of its own shares at RM20.00 cash.

1. Prepare journal entries to record each of these transactions for 2017.

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