exercise 2 Given the following data for 2014: 50000:2000 = 2, 25.1000-2500 Common stock Preferred stock, 10% Paid-in

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exercise 2 Given the following data for 2014: 50000:2000 = 2, 25.1000-2500 Common stock Preferred stock, 10% Paid-in capital in excess of par + Retained earnings (opening balance, credit) Cash dividends distributed in 2014 - Treasury shares Net loss for the year Preferred dividends in arrears Common stock issued Common stock outstanding Preferred stock issued and outstanding €50,000 €16,000 €220.000 €65,000 €8,500 - €4,800 €12,000 €2,000 20,000 shares 19,000 shares 4,000 shares 52.500 Required: 1. Prepare the shareholder's equity section of the balance sheet; 2. Determine the total paid-in capital; 3. Calculate the par value per share of common stock and preferred stock; 4. Calculate the book value per share of common stock and preferred stock. 5. In 2015 the company distributed a cash dividend of €4,500 and issued 1,000 shares of common stock to acquire a patent with a market value of €6,300. Journalize the transactions (differentiating between dividends to common and preferred

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1.Balance Sheet Shareholder's Equity section Common stock, issued 20000 shares Common stock outstanding,19000 shares 50000 Paid-in capital,in excess of par 220000 270000 Preferred stock,10%, issued and outstanding, 4000 shares 16000 Total paid -in capital 286000 Retained earnings 44500 Treasury shares -4800 Total Shareholder's Equity 325700 Retained Earnings---workings Debit Credit Opening Balance 65000 Cash dividends distributed in 2014 8500 Net loss for the year 12000 Closing balance 44500 65000 65000 2. Total paid-in capital as shown in 1. above is Common stock outstanding,19000 shares 50000 Paid-in capital,in excess of par 220000 270000 Preferred stock,10%, issued and outstanding, 4000 shares 16000 Total paid -in capital 286000 3.Par value per share of Common stock--- Total par value/No.of shares issued, ie.50000/20000= 2.5 per share Preferred stock----16000/4000= 4 per share 4.Book value per share of Common stock---(Total shareholders' Equity-Preferred stock)/No.of shares o/s ie. (325700-16000)/19000= 16.3 per share Preferred stock----(Par value+Preferred dividend in arrears)/No.of shares o/s ie.(16000+2000)/4000= 4.5 per share 5.. Journal Entries Debit Credit Retained Earnings 2500 Preferred dividend in arrears 2000 Cash-Preferred dividends(2000+(16000*10%)) 3600 Cash-common stock dividends (bal.) 900 Patent 6300 Common stock(1000*2.5) 2500 Paid-in capital in excess of par 3800 Updated Book value per share of Continuing from the above workings in 4., inserting the

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exercise 2 Given the following data for 2014: 50000:2000 = 2, 25

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Archived Solution

1.Balance Sheet
Shareholder's Equity section
Common stock, issued 20000 shares
Common stock outstanding,19000 shares	50000
Paid-in capital,in excess of par	220000	270000
Preferred stock,10%, issued and outstanding, 4000 shares		16000
Total paid -in capital			286000
Retained earnings			44500
Treasury shares			-4800
Total Shareholder's Equity			325700

Retained Earnings---workings
	Debit	Credit
Opening Balance		65000
Cash dividends distributed in 2014	8500
Net loss for the year	12000
Closing balance	44500
	65000	65000

2. Total paid-in capital
as shown in 1. above is
Common stock outstanding,19000 shares	50000
Paid-in capital,in excess of par	220000	270000
Preferred stock,10%, issued and outstanding, 4000 shares		16000
Total paid -in capital		286000

5.. Journal Entries	Debit	Credit
Retained Earnings	2500
Preferred dividend in arrears	2000
Cash-Preferred dividends(2000+(16000*10%))		3600
Cash-common stock dividends (bal.)		900

Patent	6300
Common stock(1000*2.5)		2500
Paid-in capital in excess of par		3800