Question 1 The common stock of Warner Inc. is currently selling at $117 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is $8; book value is $73 per share. 6.01 million shares are issued and outstanding. Prepare the necessary journal entries assuming the following. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The board votes a 2-for-1 stock split. (b) The board votes a 100% stock dividend. No. Account Titles and Explanation Debit Credit (a) (b) (To record the declaration.) (To record the distribution.) Question 2 On January 5, 2012, Phelps Corporation received a charter granting the right to issue 5,400 shares of $103 par value, 6% cumulative and nonparticipating preferred stock, and 52,700 shares of $10 par value common stock. It then completed these transactions. Jan. 11 Issued 21,720 shares of common stock at $18 per share. Feb. 1 Issued to Sanchez Corp. 4,500 shares of preferred stock for the following assets: equipment with a fair value of $59,390; a factory building with a fair value of $172,900; and land with an appraised value of $326,300. July 29 Purchased 1,850 shares of common stock at $19 per share. (Use cost method.) Aug. 10 Sold the 1,850 treasury shares at $14 per share. Dec. 31 Declared a $0.30 per share cash dividend on the common stock and declared the preferred dividend. Dec. 31 Closed the Income Summary account. There was a $183,440 net income. (a) Record the journal entries for the transactions listed above. (Round answers to 0 decimal places, e.g. 125. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record entries in the order displayed in the problem statement.) Date Account Titles and Explanation Debit Credit January 11 February 1 July 29 August 10 December 31 December 31 (b) Prepare the stockholders’ equity section of Phelps Corporation’s balance sheet as of December 31, 2012. (For preferred stock, common stock and treasury stock enter the account name only and do not provide the descriptive information provided in the question.) PHELPS CORPORATION Stockholders’ Equity December 31, 2012 $ $ $ Question 3 On January 1, 2012, Bailey Industries had stock outstanding as follows. 6% Cumulative preferred stock, $119 par value,    issued and outstanding 10,800 shares $1,285,200 Common stock, $10 par value, issued and    outstanding 241,200 shares 2,412,000 To acquire the net assets of three smaller companies, Bailey authorized the issuance of an additional 176,400 commo ...

1. Question 1
The common stock of Warner Inc. is currently selling at
$117 per share. The directors wish to reduce the share price and
increase share volume prior to a new issue. The per share par
value is $8; book value is $73 per share. 6.01 million shares are
issued and outstanding.
Prepare the necessary journal entries assuming the following.
(If no entry is required, select "No Entry" for the account titles
and enter 0 for the amounts.Credit account titles are
automatically indented when amount is entered. Do not indent
manually.)
(a)
The board votes a 2-for-1 stock split.
(b)
The board votes a 100% stock dividend.
No.
Account Titles and Explanation
Debit
Credit
(a)

2. (b)
(To record the declaration.)
(To record the distribution.)
Question 2
On January 5, 2012, Phelps Corporation received a charter
granting the right to issue 5,400 shares of $103 par value, 6%
cumulative and nonparticipating preferred stock,
and 52,700 shares of $10 par value common stock. It then
completed these transactions.

3. Jan. 11
Issued 21,720 shares of common stock at $18 per share.
Feb. 1
Issued to Sanchez Corp. 4,500 shares of preferred stock for the
following assets: equipment with a fair value of $59,390; a
factory building with a fair value of $172,900; and land with an
appraised value of $326,300.
July 29
Purchased 1,850 shares of common stock at $19 per share. (Use
cost method.)
Aug. 10
Sold the 1,850 treasury shares at $14 per share.
Dec. 31
Declared a $0.30 per share cash dividend on the common stock
and declared the preferred dividend.
Dec. 31
Closed the Income Summary account. There was a $183,440 net
income.
(a) Record the journal entries for the transactions listed above.
(Round answers to 0 decimal places, e.g. 125. If no entry is
required, select "No Entry" for the account titles and enter 0 for
the amounts. Credit account titles are automatically indented
when amount is entered. Do not indent manually. Record entries
in the order displayed in the problem statement.)
Date
Account Titles and Explanation
Debit
Credit
January 11

4. February 1
July 29

5. August 10
December 31
December 31
(b) Prepare the stockholders’ equity section of Phelps
Corporation’s balance sheet as of December 31, 2012. (For
preferred stock, common stock and treasury stock enter the
account name only and do not provide the descriptive
information provided in the question.)

6. PHELPS CORPORATION
Stockholders’ Equity
December 31, 2012
$

7. $

8. $
Question 3
On January 1, 2012, Bailey Industries had stock outstanding as
follows.
6% Cumulative preferred stock, $119 par value,
issued and outstanding 10,800 shares
$1,285,200
Common stock, $10 par value, issued and
outstanding 241,200 shares
2,412,000
To acquire the net assets of three smaller companies, Bailey
authorized the issuance of an additional 176,400 common
shares. The acquisitions took place as shown below.
Date of Acquisition
Shares Issued
Company A April 1, 2012
63,600
Company B July 1, 2012

9. 85,200
Company C October 1, 2012
27,600
On May 14, 2012, Bailey realized a $106,800 (before taxes)
insurance gain on the expropriation of investments originally
purchased in 2000.
On December 31, 2012, Bailey recorded net income of
$321,600 before tax and exclusive of the gain.
Assuming a 43% tax rate, compute the earnings per share data
that should appear on the financial statements of Bailey
Industries as of December 31, 2012. Assume that the
expropriation is extraordinary. (Round answer to 2 decimal
places, e.g. $2.55.)
Bailey Industries
Income Statement
For the year ended December 31, 2012
$
$
Question 4
Charles Austin of the controller’s office of Thompson
Corporation was given the assignment of determining the basic

10. and diluted earnings per share values for the year ending
December 31, 2013. Austin has compiled the information listed
below.
1.
The company is authorized to issue 8,400,000 shares of $10 par
value common stock. As of December 31,
2012, 2,100,000 shares had been issued and were outstanding.
2.
The per share market prices of the common stock on selected
dates were as follows.
Price per Share
July 1, 2012
$20
January 1, 2013
21
April 1, 2013
25
July 1, 2013
11
August 1, 2013
10.5
November 1, 2013
9
December 31, 2013

11. 10
3.
A total of 728,400 shares of an authorized 1,353,600 shares of
convertible preferred stock had been issued on July 1, 2012.
The stock was issued at its par value of $25, and it has a
cumulative dividend of $3 per share. The stock is convertible
into common stock at the rate of one share of convertible
preferred for one share of common. The rate of conversion is to
be automatically adjusted for stock splits and stock dividends.
Dividends are paid quarterly on September 30, December 31,
March 31, and June 30.
4.
Thompson Corporation is subject to a 40% income tax rate.
5.
The after-tax net income for the year ended December 31, 2013,
was $11,640,000.
The following specific activities took place during 2013.
1.
January 1—A 5% common stock dividend was issued. The
dividend had been declared on December 1, 2012, to all
stockholders of record on December 29, 2012.
2.
April 1—A total of 391,200 shares of the $3 convertible
preferred stock was converted into common stock. The company
issued new common stock and retired the preferred stock. This
was the only conversion of the preferred stock during 2013.
3.
July 1—A 2-for-1 split of the common stock became effective

12. on this date. The board of directors had authorized the split on
June 1.
4.
August 1—A total of 312,000 shares of common stock were
issued to acquire a factory building.
5.
November 1—A total of 33,900 shares of common stock were
purchased on the open market at $9 per share. These shares
were to be held as treasury stock and were still in the treasury
as of December 31, 2013.
6.
Common stock cash dividends—Cash dividends to common
stockholders were declared and paid as follows.
April 15—$0.30 per share
October 15—$0.20 per share
7.
Preferred stock cash dividends—Cash dividends to preferred
stockholders were declared and paid as scheduled.
(a) Determine the number of shares used to compute basic
earnings per share for the year ended December 31,
2013. (Round answer to 0 decimal places, e.g. 1,500.)
Number of shares to compute basic earnings per share
(b) Determine the number of shares used to compute diluted

13. earnings per share for the year ended December 31,
2013. (Round answer to 0 decimal places, e.g. 1,500.)
Number of shares to compute diluted earnings per share
(c) Compute the adjusted net income to be used as the
numerator in the basic earnings per share calculation for the
year ended December 31, 2013.
Adjusted net income
$