Question

P13-3

sif Bledsoe deda common share What would be the effect on 25N common stock dividend on the outil selling at se per share! Common stock Additional pidin capital Retained earnings Total stockholders'equity What would be the effect on the following balance 2-far c k split at a time when the stock is selling at so Common stock Additional paid-in capital alling at $60 per share? s of $10 par value common stock, of ock, of which quity accounts at Decem P13-3 Retained earnings Treasury stock Total stockholders' equity Lyons, Inc., had 1,000,000 authorized shares of Sio par val 400,000 shares were issued and outstanding. The stockholders' cauit ber 31, 2004, had the following credit balances: Common stock Additional puid in capital-common Retained earnings Accumulated other comprehensive income $4,000,000 840,000 3,800,000 120,000 tockholders' equity ac- 79 cumulative preferred Transactions during 2005 and other information relating to the stockhold counts were as follows: a On January 8, 2005, Lyons issued 30,000 shares of $100 par, 7% cumul stock at $105 per share. Lyons had 30,000 authorized shares of preferred stor b On March 1.2005. Lyons reacquired 10,000 shares of its common stock at S12 per share. Lyons uses the cost method of accounting for treasury stock c On April 8, 2005, Lyons issued 50,000 shares of previously unissued common stoc for $600,000. such common stock s common stock at a price of d. On November 10, 2005, Lyons sold 4,000 shares of treasury stock for $10 per share 6. Net income for the year ended December 31, 2005, was $748,000. f. The company experienced a holding loss of $45,000 net of taxes on its available for sale securities during 2005. & On December 31, 2005, the board of directors declared the yearly cash dividend on the preferred stock, payable on January 15, 2006, to stockholders of record as of De- cember 31, 2005. The board of directors also declared a cash dividend of $0.20 per share on the common stock, payable on January 15, 2006, to stockholders of record as of December 31, 2005. Required: a. Prepare a statement of changes in stockholders' equity for the year ended Deco 31, 2005, in good form. b. Prepare the stockholders' equity section of the balance sheet at December 31, in good form. for the year ended December neet at December 31, 2005,

Answer 1

Debit $ 3,150,000 Journal Entries Date Particulars 8-Jan Cash To 7% Cumulative Preference shares To Additional Paid in Capital - 7% Cumulative preference shares Credit (30000 shares *$105) $ 3,000,000 (30000 shares *$100) $ 150,000 $ 120,000 (10,000 shares @$12) 1-Mar Treasury Stock To Cash $ 120,000 $ 600,000 8-Apr Cash To Common stock To Additional Paid in capital-common $ $ 500,000 (50,000 shares @$10) 100,000 $ (4000 shares @$10) 10-Nov Cash Additional paid in capital-common To Treasury Stock 40,000 8,000 $ 48,000 (4000 shares @$12) $ 210,000 (30000 shares * 100 *7%) 31-Dec Retained Earnings To Dividend Payable - Preference shares $ 210,000

88,800 (400,000 -10,000 +50,000+4000) shares *$0.20 Retained Earnings To Dividend Payable - Common shares $ 88,800 a) Statement of Changes in Stockholder's Equity Additiona Paid in Capital Common $ 340,000 Additiona 7% Cumulative Paid in Capital- Preference | Preference shares shares Treasury Stock Common Stock $ 4,000,000 Retained Earnings $3,800,000 $ 3,000,000 $ 150,000 $ (120,000) 1$ 500,000 $ $ 100,000 (8,000) Accumulated and Other Comprehensive income Total $ 120,000 $ 8,760,000 $ 3,150,000 $ (120,000) $ 600,000 $ 40,000 $ 748,000 $ (210,000 $ (88,800) $ (45,000) $ (45,000) $ 75,000 $12,834,200 $ Opening Balance 7% Cumulative Preference shares Issues Treasury Stock purchased Common stock issued Treasury Stock resold Net income for the year Dividend Payable- Preference shares Dividend Payable- Common shares Loss on Available for sale securities Total 48,000 $ 748,000 $ (210,000) $ (88,800) $ 4,500,000 $ 932,000 $ 3,000,000 $ 150,000 $ (72,000) $4,249,200

b) Equity Section of Balance Sheet Common Stock (450,000 shares) Additional Paid in Capital-Common 7% Cumulative Preference shares (30,000 shares) Additional Paid in Capital-Preference shares Less: Treasury Stock (6,000 shares@$12) $ $ $ $ $ 4,500,000 932,000 3,000,000 150,000 (72,000) $ 8,510,000 Retained Earnings $ 4,249,200 Accumulated and Other Comprehensive income $ 75,000 $ 12,834,200