Accounting: Stock Market
ACC 112
Solutions to
CHAPTER 13 HANDOUT
Corporations: Organization, Capital Stock Transactions and Dividends
Copyright protected: Janice Stoudemire, CPA
Certain material used with permission of South-Western Publishing
HOW DO YOU ACCOUNT FOR ORGANIZATION COSTS?
Example: A company incorporates on 9/1/08 and incurs organization expenses of $4,000 attorney fees, $3,000 accounting fees, and $3,000 stock printing costs.
•Journal entry required on 9/1/08
Organization Costs (() 10,000 Cash (() 10,000
•How much amortization expense should be recorded on 12/31/08?
$10,000 / 5 years = $2,000 per year * 4/12 = $667
Amortization Expense, Organization Costs (() 667 Organization Costs (() 667
•How much amortization expense should be recorded on 12/31/09?
$10,000 / 5 years = $2,000
•Journal entry required on 12/31/09
Amortization Expense, Organization Costs (() 2,000 Organization Costs (() 2,000
EXAMPLE:
XYZ Corporation is authorized to sell 1 million shares of common stock; 750,000 shares have been issued, and 50,000 shares have been reacquired by XYZ. How many shares are outstanding?
(Answer: $750,000 –50,000 = $700,000)
EXAMPLE: If we issue 12%, $200 par value Preferred Stock, what is the annual dividend per share?
$200 par * 12% = $24 per year per share
EXAMPLE:
Part 1:
Belson Corporation has 10,000 common shareholders and 5,000 preferred shareholders. The preferred stock has a $5 dividend rate. Two years of dividends are currently in arrears. Assume that the preferred stock is cumulative and nonparticipating. Belson has $155,000 to distribute in the form of dividends. Use this information to calculate the dividends distributed to the preferred and common shareholders.
Solutions to
CHAPTER 13 HANDOUT
Corporations: Organization, Capital Stock Transactions and Dividends
Copyright protected: Janice Stoudemire, CPA
Certain material used with permission of South-Western Publishing
HOW DO YOU ACCOUNT FOR ORGANIZATION COSTS?
Example: A company incorporates on 9/1/08 and incurs organization expenses of $4,000 attorney fees, $3,000 accounting fees, and $3,000 stock printing costs.
•Journal entry required on 9/1/08
Organization Costs (() 10,000 Cash (() 10,000
•How much amortization expense should be recorded on 12/31/08?
$10,000 / 5 years = $2,000 per year * 4/12 = $667
Amortization Expense, Organization Costs (() 667 Organization Costs (() 667
•How much amortization expense should be recorded on 12/31/09?
$10,000 / 5 years = $2,000
•Journal entry required on 12/31/09
Amortization Expense, Organization Costs (() 2,000 Organization Costs (() 2,000
EXAMPLE:
XYZ Corporation is authorized to sell 1 million shares of common stock; 750,000 shares have been issued, and 50,000 shares have been reacquired by XYZ. How many shares are outstanding?
(Answer: $750,000 –50,000 = $700,000)
EXAMPLE: If we issue 12%, $200 par value Preferred Stock, what is the annual dividend per share?
$200 par * 12% = $24 per year per share
EXAMPLE:
Part 1:
Belson Corporation has 10,000 common shareholders and 5,000 preferred shareholders. The preferred stock has a $5 dividend rate. Two years of dividends are currently in arrears. Assume that the preferred stock is cumulative and nonparticipating. Belson has $155,000 to distribute in the form of dividends. Use this information to calculate the dividends distributed to the preferred and common shareholders.