ACCT2121 Exam 3 Chapters (9.19)

Lindy Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2024, there are 600,000 shares issued and outstanding. On June 30, 2024, the Board of Directors declared a 0.30 per share cash dividend to be paid on August 1, 2024, to stockholders of record on July 15, 2024

June 30: dividend ⬆️ 180,000, dividend payable⬆️ 180,000 (600,000 outstanding x .3 dividend rate) July 15: nothing August 1: Cash⬇️ 180,000, dividend payable⬇️ 180,000

On January 1, 2024, Powell Corporation issued $800,000, 5%, 5-year bonds dated January 1, 2024. Interest is paid annually on December 31st. Assume the bonds are sold at face value. 1) How much cash is received for the bonds when they are sold? 2) For each transaction, determine the accounts affected; the dollar amount associated with each account; and whether each account is increased or decreased 3) Assume the bonds are sold at 95%: how much cash is received? And how would different accounts be affected?

1) Face value: upfront=800,000 2) a. Cash⬆️ 800,000, notes payable ⬆️ 800,000 b. (800,000x.05x12/12)= 40000 so, interest expense ⬇️ 40000, cash⬇️40,000 3) a. 760,000 b. Cash⬆️760,000, bonds payable ⬆️800,000, bonds discount ⬇️40,000

Techno Inc. had the following activities: a. Purchased building for $10 cash b. Sold land that cost $20 for $25 cash c. Acquired equipment by issuing bonds, $5 d. Paid $1 cash dividend e. Issued common stock for $7 cash 1. Net cash provided by investing activities 2. Net cashed by financing

1. a) purchased building: -10 b) sold land: 25 C) total=15 2. A) cash dividend: -1 B) sale of common stock: 7 C) total=6

he following items were shown on the Balance Sheet of Martin Corporation on December 31, 2024: Stockholders' Equity Paid in Capital Common Stock, $5 par, 500,000 shares authorized; _______ shares issued and _______ outstanding $2,000,000 Additional Paid-in-Capital in Excess of Par 120,000 Retained Earnings 500,000 Treasury Stock (20,000 shares) 240,000 A) the number of shares of common stock issued B) the number of shares of common stock outstanding C) the amount of contributed capital D) the amount of earned capital E) the amount of total stockholders equity

A) 2,000,000 money from common stock/5 dollars each par= 400,000 B) 400,000 issued- 20,000 treasury= 380000 C) $1,880,000. (2,000,000 money from common stock + 120,000 paid in excess money- 240,000 treasury money) D) earned capital = retained earnings = 500,000 E) add everything but subtract treasury = 2380000

Grand Company issued $600,000, 10%, 20-year bonds on January 1, 2024, at 104. A) How much cash is received for the bonds when they are sold? B) how are accounts affected?

A) 624,000 which means 24,000 increase (600,000x1.04) B) cash ⬆️ 624,000, bonds payable ⬆️600,000, premium ⬆️24,000

Accounts Payable $500 Bonds Payable, due 12/31/49 285,000 Premium on Bonds Payable (unamortized) 2,600 Interest Payable 150 Mortgage Payable (of which $30,000 is due in the next 12 months) 300,000 Notes Payable, due 12/31/25 1,500 Notes Payable, due 2/5/26 10,000 Salaries Payable 15,000 Taxes Payable 900 Unearned Revenue 8,000 A) current liabilities? B) long term liabilities?

A) Accounts Payable 500 Interest Payable 150 Mortgage Payable 30,000 Notes Payable 1,500 Salaries Payable 15,000 Taxes Payable 900 Unearned Revenue 8,000 Total 56,050 B) Bonds Payable 285,000 Premium on Bonds Payable 2,600 Mortgage payable 270,000 Notes payable 10,000 Total 567,600

Round Corporation has been authorized to issue 25,000 shares of $100 par value, 8% preferred stock and 1,000,000 shares of $4 par common stock. At December 31, 2024, the accounting records reflect the following Stockholders' Equity balances: Preferred Stock, $100 par, 8%, 25,000 shares authorized; ___________ shares issued and outstanding $ 400,000 Add'l Paid in Capital in Excess of Par - Preferred 72,000 Common Stock, $4 par, 1,000,000,000 shares authorized; ___________ shares issued and outstanding 2,400,000 Add'l Paid in Capital in Excess of Par - Common 6,600,000 Retained Earnings 3,630,000 On February 3, 2025, the company declared a $140,000 cash dividend. There are three years of dividends. A) Assume the preferred stock is cumulative. Calculate the amount of dividends that will be allocated to the preferred stockholders and to the common stockholders. B) Assume the preferred stock is not cumulative. Calculate the amount of dividends that will be allocated to the preferred stockholders and to the common stockholders.

A) Preferred Stock $400,000 * 8% * 4 years= $128,000 Common Stock $140,000 - $128,000 12,000 B)Preferred Stock $400,000 * 8% * 1 year = 32,000 Common Stock $140,000 - $32,000 = 108,000

DIAMOND MOVER INC. borrows $10,000 cash and issues a 5-month, 12% promissory note on November 1, 2024. Diamond's fiscal year-end is December 31 A) original issuance B) accrued interest C) repayment

A) cash ⬆️ 10,000, notes payable ⬆️ 10,000 B) interest expense ⬆️ 200 (10,000x.12x2/12), interest payable ⬆️ 200 C) notes payable ⬇️ 10,000, interest payable ⬇️ 200, interest expense ⬆️ 300 (10,000x.12x3/12), cash ⬇️ 10,500

Samson Company had the following transactions. Record the following transactions. (a) Issued 4,000 shares of $100 par preferred stock for $107 cash. (b) Issued 8,000 shares of common stock with a par value of $10 for $110,000 cash. (c) Purchased 500 shares of treasury common stock for $24 per share.

A) cash ⬆️ 428000, preferred stock ⬆️400,000, PIC ⬆️ 28000 B) Cash ⬆️ 110,000, common stock ⬆️ 80,000, PIC ⬆️ 30,000 C) Cash⬇️ 12000, treasury stock ⬆️12000

The comparative Balance Sheets, the current year summarized Income Statement and additional information are presented below for Wickersham Brothers Inc. Prepare the Statement of Cash Flows for the year ended December 31, 2024, using the indirect method

Cash Flows from Operating Activities Net Income 25,000 Depreciation Expense 15,000 Increase in Accounts Receivable (10,000) Decrease in Inventory 5,000 Decrease in Accounts Payable (2,000) Increase in Wages Payable 1,000 Net Cash Provided by Operating Activities 34,000 Cash Flows from Investing Activities Purchase of Plant and Equipment (50,000) Net Cash Used by Investing Activities (50,000) Cash Flows from Financing Activities Repayment of Bonds Payable (10,000) Proceeds from Issuance of Common Stock 20,000 Cash Dividends Paid (16,000) Net Cash Used by Financing Activities (6,000) Net Change in Cash (22,000) Cash at Beginning of Year 72,000 Cash at End of Year 50,000

Use the information below to prepare the Statement of Cash Flows for Caribbean Pirates for the year ended December 31, 2024. Use the indirect method when preparing the Operating Activities section

Cash Flows from Operating Activities Net Income 42 Depreciation Expense 9 Loss on Sale of Land 4 Increase in Accounts Receivable (7) Decrease in Inventory 10 Increase in Prepaid Rent (2) Decrease in Accounts Payable (5) Increase in Interest Payable 1 Decrease in Income Tax Payable (2) Net Cash Provided by Operating Activities 50 Cash Flows from Investing Activities Sale of Land 6 Purchase of Building (35) Net Cash Used by Investing Activities (29) Cash Flows from Financing Activities Issuance of Common Stock 5 Cash Dividends Paid (12) Net Cash Used by Financing Activities (7) Net Change in Cash 14 Cash at Beginning of Year 48 Cash at End of Year 62

Companies frequently issue both preferred stock and common stock. What are the major differences in the rights of stockholders between these two classes of stock?

Common stockholders have the right to vote on corporate actions that require stockholders' approval while preferred stockholders generally do not have voting rights. However, preferred stockholders will receive dividends and assets in the event of liquidation prior to common stockholders. Preferred stockholders may also have a cumulative dividend feature that the amount of dividends paid to the preferred stockholders.

Acquired $30,000 land by issuing bonds NC

Non-cash activity

What is the difference between Paid-in Capital and Retained Earnings?

Paid-in Capital (i.e., Contributed Capital) - the total amount of cash and other assets paid into the corporation by stockholders in exchange for capital stock Retained Earnings (i.e., Earned Capital) - Net Income that a corporation retains in the business

Name at least three reasons why a corporation might acquire treasury stock.

a) To reissue the shares to officers and employees under bonus and stock compensation plans b) To increase trading of the company's stock in the hopes of enhancing its market value c) To have additional shares available for use in the acquisition of other companies d) To reduce the number of shares outstanding and thereby, increase reported Earnings Per Share.

Declared and paid a $10,000 cash dividend

financing activity

Issued $20 million in bonds for cash

financing activity

Issued common stock for $10,000 cash

financing activity

Paid $80 million to purchase a building

investing activity

Sold equipment for $5,000 cash

investing activity

Collected a $15,000 Accounts Receivable

operating activity

Paid a $20,000 Accounts Payable

operating activity

Received $25,000 cash for services provided to a customer

operating activity