Chapter 13 Demonstration Problems Stockholders' Equity Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-1

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-2 Future Express Inc. completed the following stock issuance transactions: E13-19D May 5Issued 3,000 shares of $1 par value common stock for cash of $8.00 per share. Jun. 1Issued 500 shares of $5, no-par preferred stock for $20,000 cash. Jun. 15Received equipment with a market value of $90,000 in exchange for 5,000 shares of the $1 par value common stock. Requirements 1.Journalize the transactions. Explanations are not required. 2.How much paid-in capital did these transactions generate for Future Express?

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-3 May 5: Issued 3,000 shares of $1 par value common stock for cash of $8.00 per share. E13-19D—Req.1 DateAccounts and ExplanationDebitCredit May 5 Cash ($8.00 per share × 3,000 shares) 24,000 Common Stock ($1 per share × 3,000 shares) 3,000 Paid-In Capital in Excess of Par—Common 21,000 ($24,000 − $3,000)

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-4 Jun. 1: Issued 500 shares of $5, no-par preferred stock for $20,000 cash. E13-19D—Req.1 DateAccounts and ExplanationDebitCredit Jun. 1 Cash 20,000 Preferred Stock 20,000

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-5 Jun. 15: Received equipment with a market value of $90,000 in exchange for 5,000 shares of the $1 par value common stock. E13-19D—Req.1 DateAccounts and ExplanationDebitCredit Jun. 15 Equipment90,000 Common Stock—$1 Par Value 5,000 ($1 per share × 5,000 shares) Paid-In Capital in Excess of Par—Common85,000 ($90,000 − $5,000)

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-6 E13-19D—Req.2 Cash for Common Stock﴾$8 × 3,000 shares﴿ $24,000

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-7 E13-19D—Req.2 Cash for Common Stock﴾$8 × 3,000 shares﴿ $24,000 Cash for Preferred Stock 20,000

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-8 E13-19D—Req.2 Cash for Common Stock﴾$8 × 3,000 shares﴿ $24,000 Cash for Preferred Stock 20,000 Equipment for Common Stock 90,000

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-9 E13-19D—Req.2 Cash for Common Stock﴾$8 × 3,000 shares﴿ $24,000 Cash for Preferred Stock 20,000 Equipment for Common Stock 90,000 Total paid-in capital $134,000

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-10 Boston Stream, Corp. had the following stockholders’ equity at December 31, 2013: E13-27D Stockholders’ Equity Paid-In Capital: Common Stock—$2 Par Value; 1,000 shares authorized, 400 shares issued and outstanding$800 Paid-In Capital in Excess of Par—Common1,700 Total Paid-In Capital2,500 Retained Earnings4,000 Total Stockholders’ Equity$6,500 On May 31, 2014, Boston Stream split its common stock 2-for-1. Prepare the stockholders’ equity section of the balance sheet immediately after the split. Assume the balance in retained earnings is unchanged from December 31, 2013.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-11 E13-27D Stockholders’ Equity Paid-In Capital: Common Stock—$1 Par Value; 1,000 shares authorized, 800 shares issued and outstanding$800

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-12 E13-27D Stockholders’ Equity Paid-In Capital: Common Stock—$1 Par Value; 1,000 shares authorized, 800 shares issued and outstanding$800 Paid-In Capital in Excess of Par—Common1,700

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-13 E13-27D Stockholders’ Equity Paid-In Capital: Common Stock—$1 Par Value; 1,000 shares authorized, 800 shares issued and outstanding$800 Paid-In Capital in Excess of Par—Common1,700 Total Paid-In Capital2,500

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-14 E13-27D Stockholders’ Equity Paid-In Capital: Common Stock—$1 Par Value; 1,000 shares authorized, 800 shares issued and outstanding$800 Paid-In Capital in Excess of Par—Common1,700 Total Paid-In Capital2,500 Retained Earnings4,000

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-15 E13-27D Stockholders’ Equity Paid-In Capital: Common Stock—$1 Par Value; 1,000 shares authorized, 800 shares issued and outstanding$800 Paid-In Capital in Excess of Par—Common1,700 Total Paid-In Capital2,500 Retained Earnings4,000 Total Stockholders’ Equity$6,500

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-16 Magnum, Corp. earned net income of $130,000 and paid the minimum dividend to preferred stockholders for Assume that there are no changes in common shares outstanding. Magnum's books include the following figures: E13-33D Requirements 1.Compute Magnum's EPS for the year. 2.Assume Magnum's market price of a share of common stock is $5 per share. Compute Magnum’s price/earnings ratio for the year. Preferred Stock—4%, $100 Par Value; 1,000 shares authorized, 600 shares issued and outstanding $60,000 Common Stock—$1 Par Value; 100,000 shares authorized, 80,000 shares issued, 75,000 shares outstanding 80,000 Paid-In Capital in Excess of Par—Common 550,000 Treasury Stock—Common; 5,000 shares at cost ﴾20,000﴿

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-17 E13-33D—Req.1 Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-18 E13-33D—Req.1 Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-19 E13-33D—Req.1 Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 ═ $127,600 75,000 Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-20 E13-33D—Req.1 Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 ═ $127,600 75,000 ═ $1.70 per share Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000.

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-21 E13-33D—Req.1&2 Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 ═ $127,600 75,000 ═ $1.70 per share Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000. Price/earnings ratio ═ Market price per share of common stock Earnings per share

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-22 E13-33D—Req.1&2 Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 ═ $127,600 75,000 ═ $1.70 per share Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000. Price/earnings ratio ═ Market price per share of common stock Earnings per share ═$5 $1.70

Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall13-23 E13-33D—Req.1&2 Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 ═ $127,600 75,000 ═ $1.70 per share Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000. Price/earnings ratio ═ Market price per share of common stock Earnings per share ═$5 $1.70 ═ $2.94 per share

End of Chapter Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall