Ex. 11.

a.

150,000 shares ($15,000,000 total par value, divided by $100 par value per share)

b. $1,050,000 ($15,000,000 total par value 7% or 150,000 $100 7%)

c.

$16 [($20 million par value + $44 million additional paid-in capital) 4,000,000 shares
issued]

d. $35,000,000 legal capital ($15,000,000 preferred, plus $20,000,000 common)

$79,000,000 total paid-in capital ($35,000,000 legal capital, plus $44,000,000 additional
paid-in capital)

Ex. 11.9

a. Feb. 10

June

Treasury Stock
425,000
Cash
Purchased 17,000 shares of treasury
stock at $25 per share.

4 Cash

Treasury Stock
Additional Paid-in Capital
Treasury Stock..
Sold 6,000 shares of treasury stock, cost
$150,000, for $33 per share.

Dec. 22

Cash
Additional Paid-in Capital: Treasury
Stock
Treasury Stock
Sold 4,000 shares of treasury stock, cost
$100,000, for $22 per share.

425,000

198,000
150,000
48,000

88,000
12,000
100,000

b. Restriction of retained earnings for treasury stock owned at year-end:

$175,000 (7,000 shares still owned $25 per share cost)
c. No, a restriction on retained earnings does not affect the total amount of retained
earnings reported in the balance sheet. A restriction of retained earnings is
disclosed, but does not reduce the total amount of retained earnings of a
company. The restriction on retained earnings simply limits the amount of
dividends the corporation can pay as long as it holds treasury stock.

PROBLEM 11.5A
SMITHFIELD PRODUCTS

a.

Par value of all preferred stock outstanding

Par value per share of preferred stock
Number of shares of preferred stock outstanding ($2,400,000 $100)

$
$

2,400,000
100
24,000

b.

Dividend requirement per share of preferred stock (7 1/2% x $100)

Number of shares of preferred stock outstanding (a)
Annual preferred stock dividend requirement ($7.50 x 24,000 shares)

$
$

7.50
24,000
180,000

c.

Par value of all common stock outstanding

$
Par value per share of common stock
$
Number of shares of common stock outstanding ($900,000 $2 per share)

900,000
2
450,000

d.

Par value of all common stock issued

$
Paid-in capital in excess of par: Common
Total issuance price of all common stock
$
Number of shares of common stock issued (c)
Average issuance price per share of common ($9,225,000 450,000 shares) $

900,000
8,325,000
9,225,000
450,000
20.50

e.

Par value of preferred stock

Par value of common stock
Total legal capital

2,400,000
900,000
3,300,000

Total legal capital (e)

Add: Additional paid-in capital: Common stock
Total paid-in capital

Total stockholders equity

Less: Par value of preferred stock [24,000 shares (a) x $100 per share]
Equity of common stockholders
Number of shares of common stock outstanding (c)
Book value per share ($11,820,000 450,000 shares)

Retained earnings, beginning of the year

Add: Net income for the year
Subtotal
Less: Retained earnings, end of the year
Total dividends paid during the year
Less: Dividends on preferred stock (part b)
Total dividends on common stock
Number of common shares outstanding
Dividends per share of common stock ($1,912,500 450,000)

f.

g.

h.

$
$

$
$
$
$

3,300,000
8,325,000
11,625,000
14,220,000
2,400,000
11,820,000
450,000
26.27
717,500
3,970,000
4,687,500
2,595,000
2,092,500
180,000
1,912,500
450,000
4.25

ROBLEM 11.9A
ERNDON INDUSTRIES

a.
Stockholders equity:
10% preferred stock, $100 par, cumulative, authorized,
issued, and outstanding 30,000 shares
Common stock, $10 par, 200,000 shares authorized,
120,000 shares issued, of which 10,000 shares are held in
treasury
Additional paid-in capital: Common stock
Additional paid-in capital: Treasury stock*
Total paid-in capital
Retained earnings**
Subtotal
Less:
Treasury stock (10,000
Total stockholders equity at Dec. 31, 2007

$ 3,000,000

1,200,000
720,000
50,000
$ 4,970,000
1,925,000
$ 6,895,000
200,000
$ 6,695,000

*Computation of additional paid-in capital on treasury stock:

Purchase price per share: $400,000 20,000 shares = $20
per share
Reissue price per share: $250,000 10,000 shares = $25
per share
Paid-in capital per share reissued: $5 per share ($25 - $20)
Total paid-in capital on treasury stock: $50,000
($5 per share x 10,000 shares reissued)

**Computation of retained earnings at Dec. 31, 2007:

$ 3,700,000
Net income (for years 20032007)
Less:
Preferred dividend (for years 200
###
$100 x 10% x 30,000 s
Less:
Common dividends
20032004: 120,000 share 120,000
20052006: 100,000 share 100,000
55,000
1,775,000
2007: 110,000 shares
$ 1,925,000
Retained earnings, Dec. 31, 2007