Question 1 Your answer is correct. Indicate whether each of the following statements is true or false. 1. The corporation is an entity separate and distinct from its owners. True 2. The liability of stockholders is normally limited to their investment in the corporation. True 3. The relative lack of government regulation is an advantage of the corporate form of business. False 4. There is no journal entry to record the authorization of capital stock. True 5. No-par value stock is quite rare today. False Question 2 Your answer is correct. Garcia Corporation recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation’s capital stock. May 2 Cash 103,320     Capital Stock 103,320        (Issued 7,380 shares of $11 par value common stock at $14 per share) 10 Cash 736,170     Capital Stock 736,170        (Issued 13,890 shares of $19 par value preferred stock at $53 per share) 15 Capital Stock 7,800     Cash 7,800        (Purchased 600 shares of common stock for the treasury at $13 per share) On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit May 2 Cash 103320 Common Stock 81180 Paid-in Capital in Excess of Par Value-Common Stock 22140 May 10 Cash 736170 Preferred Stock 263910 Paid-in Capital in Excess of Par Value-Preferred Stock 472260 May 15 Treasury Stock 7800 Cash 7800 Question 3 Your answer is correct. On October 31, the stockholders’ equity section of Pele Company’s balance sheet consists of common stock $787,200 and retained earnings $424,200. Pele is considering the following two courses of action: (1) Declaring a 6% stock dividend on the 98,400 $8 par value shares outstanding (2) Effecting a 2-for-1 stock split that will reduce par value to $4 per share. The current market price is $18 per share. Prepare a tabular summary of the effects of the alternative actions on the company’s stockholders’ equity and outstanding shares. Pele Company’s Balance Sheet Before Action After Stock Dividend After Stock Split Stockholders’ equity    Paid-in capital $ 787200 $ 893472 $ 787200    Retained earnings 424200 317928 424200       Total stockholders’ equity $ 1211400 $ 1211400 $ 1211400 Outstanding shares 98400 104304 196800 Question 4 The stockholders’ equity section of Tootsie Roll Industries’ balance sheet is shown in the Consolidated Statement of Financial Position. (N ...

1. Question 1
Your answer is correct.
Indicate whether each of the following statements is true or
false.
1.
The corporation is an entity separate and distinct from its
owners.
True
2.
The liability of stockholders is normally limited to their
investment in the corporation.
True
3.
The relative lack of government regulation is an advantage of
the corporate form of business.
False

2. 4.
There is no journal entry to record the authorization of capital
stock.
True
5.
No-par value stock is quite rare today.
False
Question 2
Your answer is correct.
Garcia Corporation recently hired a new accountant with
extensive experience in accounting for partnerships. Because of
the pressure of the new job, the accountant was unable to
review what he had learned earlier about corporation
accounting. During the first month, he made the following
entries for the corporation’s capital stock.
May 2

3. Cash
103,320
Capital Stock
103,320
(Issued 7,380 shares of $11 par value common stock at
$14 per share)
10
Cash
736,170
Capital Stock
736,170

4. (Issued 13,890 shares of $19 par value preferred stock at
$53 per share)
15
Capital Stock
7,800
Cash
7,800
(Purchased 600 shares of common stock for the treasury at
$13 per share)
On the basis of the explanation for each entry, prepare the
entries that should have been made for the capital stock
transactions. (Record entries in the order displayed in the
problem statement. Credit account titles are automatically
indented when amount is entered. Do not indent manually.)
Date

5. Account Titles and Explanation
Debit
Credit
May 2
Cash
103320
Common Stock
81180
Paid-in Capital in Excess of Par Value-Common Stock
22140
May 10
Cash
736170
Preferred Stock
263910
Paid-in Capital in Excess of Par Value-Preferred Stock
472260
May 15
Treasury Stock
7800
Cash
7800

6. Question 3
Your answer is correct.
On October 31, the stockholders’ equity section of Pele
Company’s balance sheet consists of common stock
$787,200 and retained earnings $424,200.
Pele is considering the following two courses of action:
(1)
Declaring a 6% stock dividend on the 98,400 $8 par value
shares outstanding
(2)
Effecting a 2-for-1 stock split that will reduce par value to
$4 per share.
The current market price is $18 per share.
Prepare a tabular summary of the effects of the alternative
actions on the company’s stockholders’ equity and outstanding
shares.
Pele Company’s
Balance Sheet
Before Action
After Stock Dividend
After Stock Split

7. Stockholders’ equity
Paid-in capital
$ 787200
$ 893472
$ 787200
Retained earnings
424200
317928
424200
Total stockholders’ equity
$ 1211400
$ 1211400
$ 1211400
Outstanding shares
98400
104304
196800

8. Question 4
The stockholders’ equity section of Tootsie Roll Industries’
balance sheet is shown in the Consolidated Statement of
Financial Position. (Note that Tootsie Roll has two classes of
common stock. To answer the following questions, add the two
classes of stock together.)
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Earnings, Comprehensive Earnings and Retained Earnings (in
thousands except per share data)
For the year ended December 31,
2011
2010
2009
Net product sales
$528,369
$517,149

9. $495,592
Rental and royalty revenue
4,136
4,299
3,739
Total revenue
532,505
521,448
499,331
Product cost of goods sold
365,225
349,334

10. 319,775
Rental and royalty cost
1,038
1,088
852
Total costs
366,263
350,422
320,627
Product gross margin
163,144
167,815

11. 175,817
Rental and royalty gross margin
3,098
3,211
2,887
Total gross margin
166,242
171,026
178,704
Selling, marketing and administrative expenses
108,276
106,316

12. 103,755
Impairment charges
—
—
14,000
Earnings from operations
57,966
64,710
60,949
Other income (expense), net
2,946
8,358

13. 2,100
Earnings before income taxes
60,912
73,068
63,049
Provision for income taxes
16,974
20,005
9,892
Net earnings
$43,938
$53,063

14. $53,157
Net earnings
$43,938
$53,063
$53,157
Other comprehensive earnings (loss)
(8,740
)
1,183

15. 2,845
Comprehensive earnings
$35,198
$54,246
$56,002
Retained earnings at beginning of year.
$135,866
$147,687

16. $144,949
Net earnings
43,938
53,063
53,157
Cash dividends
(18,360
)
(18,078
)
(17,790
)
Stock dividends
(47,175
)
(46,806
)

17. (32,629
)
Retained earnings at end of year
$114,269
$135,866
$147,687
Earnings per share
$0.76
$0.90

18. $0.89
Average Common and Class B Common shares outstanding
57,892
58,685
59,425
(The accompanying notes are an integral part of these
statements.)
CONSOLIDATED STATEMENTS OF
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in

19. thousands except per share data)
Assets
December 31,
2011
2010
CURRENT ASSETS:
Cash and cash equivalents
$78,612
$115,976
Investments

20. 10,895
7,996
Accounts receivable trade, less allowances of $1,731 and $1,531
41,895
37,394
Other receivables
3,391
9,961
Inventories:

21. Finished goods and work-in-process
42,676
35,416
Raw materials and supplies
29,084
21,236
Prepaid expenses
5,070
6,499
Deferred income taxes
578

22. 689
Total current assets
212,201
235,167
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land
21,939
21,696

23. Buildings
107,567
102,934
Machinery and equipment
322,993
307,178
Construction in progress
2,598
9,243
455,097
440,974

24. Less—Accumulated depreciation
242,935
225,482
Net property, plant and equipment
212,162
215,492
OTHER ASSETS:
Goodwill
73,237

25. 73,237
Trademarks
175,024
175,024
Investments
96,161
64,461
Split dollar officer life insurance
74,209
74,441

26. Prepaid expenses
3,212
6,680
Equity method investment
3,935
4,254
Deferred income taxes
7,715
9,203
Total other assets
433,493

27. 407,300
Total assets
$857,856
$857,959
Liabilities and Shareholders’ Equity
December 31,
2011
2010
CURRENT LIABILITIES:

28. Accounts payable
$10,683
$9,791
Dividends payable
4,603
4,529
Accrued liabilities
43,069
44,185
Total current liabilities
58,355

29. 58,505
NONCURRENT LIABILITES:
Deferred income taxes
43,521
47,865
Postretirement health care and life insurance benefits
26,108
20,689
Industrial development bonds

30. 7,500
7,500
Liability for uncertain tax positions
8,345
9,835
Deferred compensation and other liabilities
48,092
46,157
Total noncurrent liabilities
133,566
132,046

31. SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value—120,000 shares
authorized—36,479 and 36,057 respectively, issued
25,333
25,040
Class B common stock, $.69-4/9 par value—40,000 shares
authorized—21,025 and 20,466 respectively, issued
14,601
14,212
Capital in excess of par value
533,677

32. 505,495
Retained earnings, per accompanying statement
114,269
135,866
Accumulated other comprehensive loss
(19,953
)
(11,213
)
Treasury stock (at cost)—71 shares and 69 shares, respectively
(1,992
)
(1,992
)

33. Total shareholders’ equity
665,935
667,408
Total liabilities and shareholders’ equity
$857,856
$857,959
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Cash Flows (in thousands)
For the year ended December 31,

34. 2011
2010
2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
$43,938
$53,063
$53,157

35. Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation
19,229
18,279
17,862
Impairment charges
—

36. —
14,000
Impairment of equity method investment
—
—
4,400
Loss from equity method investment
194
342
233

37. Amortization of marketable security premiums
1,267
522
320
Changes in operating assets and liabilities:
Accounts receivable

38. (5,448
)
717
(5,899
)
Other receivables
3,963
(2,373
)
(2,088
)
Inventories
(15,631
)
(1,447
)

39. 455
Prepaid expenses and other assets
5,106
4,936
5,203
Accounts payable and accrued liabilities
84
2,180
(2,755
)

40. Income taxes payable and deferred
(5,772
)
2,322
(12,543
)
Postretirement health care and life insurance benefits
2,022
1,429
1,384
Deferred compensation and other liabilities
2,146

41. 2,525
2,960
Others
(708
)
310
305
Net cash provided by operating activities
50,390
82,805
76,994

42. CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(16,351
)
(12,813
)
(20,831
)
Net purchase of trading securities
(3,234
)

43. (2,902
)
(1,713
)
Purchase of available for sale securities
(39,252
)
(9,301
)
(11,331
)
Sale and maturity of available for sale securities
7,680
8,208
17,511

44. Net cash used in investing activities
(51,157
)
(16,808
)
(16,364
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares repurchased and retired
(18,190
)

45. (22,881
)
(20,723
)
Dividends paid in cash
(18,407
)
(18,130
)
(17,825
)
Net cash used in financing activities
(36,597
)
(41,011
)
(38,548
)

46. Increase (decrease) in cash and cash equivalents
(37,364
)
24,986
22,082
Cash and cash equivalents at beginning of year
115,976
90,990
68,908
Cash and cash equivalents at end of year
$78,612
$115,976

47. $90,990
Supplemental cash flow information
Income taxes paid
$16,906
$20,586
$22,364

48. Interest paid
$38
$49
$182
Stock dividend issued
$47,053
$46,683
$32,538
(The accompanying notes are an integral part of these
statements.)
Answer the following questions.

49. Your answer is correct.
What is the par or stated value per share of Tootsie Roll’s
common stock? (Round answer to 4 decimal places, e.g.
1.2531.)
Par or stated value per share
$ 0.6944
Your answer is correct. Try again.
What percentage of Tootsie Roll’s authorized common stock
was issued at December 31, 2011? (Round to 0 decimal places,
e.g. 17%)
Percentage of common stock issued
%
Your answer is correct.
How many shares of common stock were outstanding at
December 31, 2010, and at December 31, 2011? (Enter the
answers in thousands.)

50. 2011
2010
Number of shares outstanding
57433
56454
Your answer is correct.
Calculate the payout ratio, earnings per share, and return on
common stockholders’ equity for 2011. (Round earnings per
share to 2 decimal places, e.g. 15.12 and all other answers to 1
decimal places, e.g. 12.5%.)
Payout ratio
41.8
%
Earnings per share
$ 0.77
Return on common stockholders’ equity
6.6
%

51. Question 5
The financial statements of The Hershey Company and Tootsie
Roll are presented below.
THE HERSHEY COMPANY
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31,
2011
2010
2009
In thousands of dollars except per share amounts
Net Sales
$6,080,788
$5,671,009

52. $5,298,668
Costs and Expenses:
Cost of sales
3,548,896
3,255,801
3,245,531
Selling, marketing and administrative
1,477,750
1,426,477
1,208,672
Business realignment and impairment (credits) charges, net
(886

53. )
83,433
82,875
Total costs and expenses
5,025,760
4,765,711
4,537,078
Income before Interest and Income Taxes
1,055,028
905,298
761,590
Interest expense, net
92,183
96,434
90,459

54. Income before Income Taxes
962,845
808,864
671,131
Provision for income taxes
333,883
299,065
235,137
Net Income
$628,962
$509,799
$435,994
Net Income Per Share—Basic—Class B Common Stock
$2.58

55. $2.08
$1.77
Net Income Per Share—Diluted—Class B Common Stock
$2.56
$2.07
$1.77
Net Income Per Share—Basic—Common Stock
$2.85
$2.29
$1.97
Net Income Per Share—Diluted—Common Stock
$2.74
$2.21
$1.90
Cash Dividends Paid Per Share:

56. Common Stock
$1.3800
$1.2800
$1.1900
Class B Common Stock
1.2500
1.1600
1.0712
The notes to consolidated financial statements are an integral
part of these statements and are included in the Hershey's 2011
Annual Report, available at www.thehersheycompany.com.
THE HERSHEY COMPANY

57. CONSOLIDATED BALANCE SHEETS
December 31,
2011
2010
In thousands of dollars
ASSETS
Current Assets:

58. Cash and cash equivalents
$693,686
$884,642
Accounts receivable—trade
399,499
390,061
Inventories
648,953
533,622
Deferred income taxes
136,861
55,760

59. Prepaid expenses and other
167,559
141,132
Total current assets
2,046,558
2,005,217
Property, Plant and Equipment, Net
1,559,717
1,437,702
Goodwill
516,745
524,134

60. Other Intangibles
111,913
123,080
Deferred Income Taxes
38,544
21,387
Other Assets
138,722
161,212
Total assets
$4,412,199
$4,272,732

61. LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
$420,017
$410,655
Accrued liabilities
612,186
593,308

62. Accrued income taxes
1,899
9,402
Short-term debt
42,080
24,088
Current portion of long-term debt
97,593
261,392
Total current liabilities
1,173,775
1,298,845

63. Long-term Debt
1,748,500
1,541,825
Other Long-term Liabilities
617,276
494,461
Total liabilities
3,539,551
3,335,131
Commitments and Contingencies
—
—

64. Stockholders’ Equity:
The Hershey Company Stockholders’ Equity
Preferred Stock, shares issued: none in 2011 and 2010
—
—
Common Stock, shares issued: 299,269,702 in 2011 and
299,195,325 in 2010
299,269
299,195

65. Class B Common Stock, shares issued: 60,632,042 in 2011
and 60,706,419 in 2010
60,632
60,706
Additional paid-in capital
490,817
434,865
Retained earnings
4,699,597
4,374,718
Treasury—Common Stock shares, at cost: 134,695,826 in
2011 and 132,871,512 in 2010
(4,258,962
)

66. (4,052,101
)
Accumulated other comprehensive loss
(442,331
)
(215,067
)
The Hershey Company stockholders’ equity
849,022
902,316
Noncontrolling interests in subsidiaries
23,626
35,285
Total stockholders’ equity
872,648

67. 937,601
Total liabilities and stockholders’equity
$4,412,199
$4,272,732
THE HERSHEY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
2011
2010
2009
In thousands of dollars

68. Cash Flows Provided from (Used by) Operating Activities
Net income
$628,962
$509,799
$435,994
Adjustments to reconcile net income to net cash provided from
operations:

69. Depreciation and amortization
215,763
197,116
182,411
Stock-based compensation expense, net of tax of $15,127,
$17,413 and $19,223, respectively
28,341
32,055
34,927
Excess tax benefits from stock-based compensation

70. (13,997
)
(1,385
)
(4,455
)
Deferred income taxes
33,611
(18,654
)
(40,578
)
Gain on sale of trademark licensing rights, net of tax of $5,962
(11,072
)
—
—

71. Business realignment and impairment charges, net of tax of
$18,333, $20,635 and $38,308, respectively
30,838
77,935
60,823
Contributions to pension plans
(8,861
)
(6,073
)
(54,457
)
Changes in assets and liabilities, net of effects from business
acquisitions and divestitures:

72. Accounts receivable—trade
(9,438
)
20,329
46,584
Inventories
(115,331
)
(13,910
)
74,000
Accounts payable
7,860

73. 90,434
37,228
Other assets and liabilities
(205,809
)
13,777
293,272
Net Cash Provided from Operating Activities
580,867
901,423
1,065,749
Cash Flows Provided from (Used by) Investing Activities

74. Capital additions
(323,961
)
(179,538
)
(126,324
)
Capitalized software additions
(23,606
)
(21,949
)
(19,146
)

75. Proceeds from sales of property, plant and equipment
312
2,201
10,364
Proceeds from sales of trademark licensing rights
20,000
—
—
Business acquisitions
(5,750
)
—
(15,220
)

76. Net Cash (Used by) Investing Activities
(333,005
)
(199,286
)
(150,326
)
Cash Flows Provided from (Used by) Financing Activities
Net change in short-term borrowings
10,834
1,156
(458,047

77. )
Long-term borrowings
249,126
348,208
—
Repayment of long-term debt
(256,189
)
(71,548
)
(8,252
)
Proceeds from lease financing agreement
47,601
—

78. —
Cash dividends paid
(304,083
)
(283,434
)
(263,403
)
Exercise of stock options
184,411
92,033
28,318
Excess tax benefits from stock-based compensation
13,997

79. 1,385
4,455
Contributions from noncontrolling interests in subsidiaries
—
10,199
7,322
Repurchase of Common Stock
(384,515
)
(169,099
)
(9,314
)
Net Cash (Used by) Financing Activities

80. (438,818
)
(71,100
)
(698,921
)
(Decrease) Increase in Cash and Cash Equivalents
(190,956
)
631,037
216,502
Cash and Cash Equivalents as of January 1
884,642
253,605
37,103
Cash and Cash Equivalents as of December 31

81. $693,686
$884,642
$253,605
Interest Paid
$97,892
$97,932
$91,623
Income Taxes Paid
292,315
350,948
252,230
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES

82. CONSOLIDATED STATEMENTS OF
Earnings, Comprehensive Earnings and Retained Earnings (in
thousands except per share data)
For the year ended December 31,
2011
2010
2009
Net product sales
$528,369
$517,149
$495,592
Rental and royalty revenue
4,136
4,299

83. 3,739
Total revenue
532,505
521,448
499,331
Product cost of goods sold
365,225
349,334
319,775
Rental and royalty cost
1,038
1,088

84. 852
Total costs
366,263
350,422
320,627
Product gross margin
163,144
167,815
175,817
Rental and royalty gross margin
3,098
3,211

85. 2,887
Total gross margin
166,242
171,026
178,704
Selling, marketing and administrative expenses
108,276
106,316
103,755
Impairment charges
—
—

86. 14,000
Earnings from operations
57,966
64,710
60,949
Other income (expense), net
2,946
8,358
2,100
Earnings before income taxes
60,912
73,068

87. 63,049
Provision for income taxes
16,974
20,005
9,892
Net earnings
$43,938
$53,063
$53,157

88. Net earnings
$43,938
$53,063
$53,157
Other comprehensive earnings (loss)
(8,740
)
1,183
2,845
Comprehensive earnings
$35,198
$54,246

89. $56,002
Retained earnings at beginning of year.
$135,866
$147,687
$144,949
Net earnings
43,938
53,063

90. 53,157
Cash dividends
(18,360
)
(18,078
)
(17,790
)
Stock dividends
(47,175
)
(46,806
)
(32,629
)
Retained earnings at end of year
$114,269
$135,866

91. $147,687
Earnings per share
$0.76
$0.90
$0.89

92. Average Common and Class B Common shares outstanding
57,892
58,685
59,425
(The accompanying notes are an integral part of these
statements.)
CONSOLIDATED STATEMENTS OF
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in
thousands except per share data)
Assets
December 31,
2011

93. 2010
CURRENT ASSETS:
Cash and cash equivalents
$78,612
$115,976
Investments
10,895
7,996
Accounts receivable trade, less allowances of $1,731 and $1,531
41,895

94. 37,394
Other receivables
3,391
9,961
Inventories:
Finished goods and work-in-process
42,676
35,416

95. Raw materials and supplies
29,084
21,236
Prepaid expenses
5,070
6,499
Deferred income taxes
578
689
Total current assets
212,201

96. 235,167
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land
21,939
21,696
Buildings
107,567
102,934
Machinery and equipment

97. 322,993
307,178
Construction in progress
2,598
9,243
455,097
440,974
Less—Accumulated depreciation
242,935
225,482

98. Net property, plant and equipment
212,162
215,492
OTHER ASSETS:
Goodwill
73,237
73,237
Trademarks
175,024

99. 175,024
Investments
96,161
64,461
Split dollar officer life insurance
74,209
74,441
Prepaid expenses
3,212
6,680
Equity method investment

100. 3,935
4,254
Deferred income taxes
7,715
9,203
Total other assets
433,493
407,300
Total assets
$857,856
$857,959

101. Liabilities and Shareholders’ Equity
December 31,
2011
2010
CURRENT LIABILITIES:
Accounts payable
$10,683
$9,791
Dividends payable

102. 4,603
4,529
Accrued liabilities
43,069
44,185
Total current liabilities
58,355
58,505
NONCURRENT LIABILITES:

103. Deferred income taxes
43,521
47,865
Postretirement health care and life insurance benefits
26,108
20,689
Industrial development bonds
7,500
7,500
Liability for uncertain tax positions
8,345

104. 9,835
Deferred compensation and other liabilities
48,092
46,157
Total noncurrent liabilities
133,566
132,046
SHAREHOLDERS’ EQUITY:
Common stock, $.69-4/9 par value—120,000 shares

105. authorized—36,479 and 36,057 respectively, issued
25,333
25,040
Class B common stock, $.69-4/9 par value—40,000 shares
authorized—21,025 and 20,466 respectively, issued
14,601
14,212
Capital in excess of par value
533,677
505,495
Retained earnings, per accompanying statement
114,269

106. 135,866
Accumulated other comprehensive loss
(19,953
)
(11,213
)
Treasury stock (at cost)—71 shares and 69 shares, respectively
(1,992
)
(1,992
)
Total shareholders’ equity
665,935
667,408
Total liabilities and shareholders’ equity

107. $857,856
$857,959
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Cash Flows (in thousands)
For the year ended December 31,
2011
2010
2009
CASH FLOWS FROM OPERATING ACTIVITIES:

108. Net earnings
$43,938
$53,063
$53,157
Adjustments to reconcile net earnings to net cash provided by
operating activities:

109. Depreciation
19,229
18,279
17,862
Impairment charges
—
—
14,000
Impairment of equity method investment

110. —
—
4,400
Loss from equity method investment
194
342
233
Amortization of marketable security premiums
1,267
522

111. 320
Changes in operating assets and liabilities:
Accounts receivable
(5,448
)
717
(5,899
)

112. Other receivables
3,963
(2,373
)
(2,088
)
Inventories
(15,631
)
(1,447
)
455
Prepaid expenses and other assets
5,106

113. 4,936
5,203
Accounts payable and accrued liabilities
84
2,180
(2,755
)
Income taxes payable and deferred
(5,772
)
2,322
(12,543
)

114. Postretirement health care and life insurance benefits
2,022
1,429
1,384
Deferred compensation and other liabilities
2,146
2,525
2,960
Others

115. (708
)
310
305
Net cash provided by operating activities
50,390
82,805
76,994
CASH FLOWS FROM INVESTING ACTIVITIES:

116. Capital expenditures
(16,351
)
(12,813
)
(20,831
)
Net purchase of trading securities
(3,234
)
(2,902
)
(1,713
)
Purchase of available for sale securities

117. (39,252
)
(9,301
)
(11,331
)
Sale and maturity of available for sale securities
7,680
8,208
17,511
Net cash used in investing activities
(51,157
)
(16,808
)

118. (16,364
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares repurchased and retired
(18,190
)
(22,881
)
(20,723
)
Dividends paid in cash

119. (18,407
)
(18,130
)
(17,825
)
Net cash used in financing activities
(36,597
)
(41,011
)
(38,548
)
Increase (decrease) in cash and cash equivalents
(37,364
)
24,986
22,082

120. Cash and cash equivalents at beginning of year
115,976
90,990
68,908
Cash and cash equivalents at end of year
$78,612
$115,976
$90,990
Supplemental cash flow information

121. Income taxes paid
$16,906
$20,586
$22,364
Interest paid
$38
$49
$182

122. Stock dividend issued
$47,053
$46,683
$32,538
(The accompanying notes are an integral part of these
statements.)
Based on the information in these financial statements, compute
the 2011 return on common stockholders’ equity, debt to assets
ratio, and return on assets for each company. (Round answers to
1 decimal places, e.g. 15.2%.)
Hershey Company

123. Tootsie Roll
Return on common
stockholders’ equity
69.5
%
6.6
%
Debt to assets
80.2
%
22.4
%
Return on assets
14.5
%
5.1
%
Compute the payout ratio for each company. Which pays out a
higher percentage of its earnings? (Round answers to 1 decimal
places, e.g. 15.2%.)

124. Hershey Company
Tootsie Roll
Payout ratio
48.3
%
41.8
%
Which pays out a higher percentage of its earnings?
HersheyCompany
pays out a higher percentage of its earnings.
Question 6
Pringle Corporation has been authorized to issue 23,900 shares
of $100 par value, 9%, noncumulative preferred stock
and 1,037,600 shares of no-par common stock.
The corporation assigned a $5 stated value to the common
stock. At December 31, 2014, the ledger contained the
following balances pertaining to stockholders’ equity.
Preferred Stock
$154,500
Paid-in Capital in Excess of Par Value—Preferred Stock
20,880
Common Stock

125. 1,930,000
Paid-in Capital in Excess of Stated Value—Common Stock
1,635,000
Treasury Stock— (3,280 common shares)
42,640
Retained Earnings
85,000
The preferred stock was issued for $175,380 cash. All common
stock issued was for cash. In November 3,280 shares of common
stock were purchased for the treasury at a per share cost of $13.
No dividends were declared in 2014.
Preferred Stock
=
(1,545 x $100)
=
$154,500
Common Stock
=
(386,000 x $5)
=
$1,930,000
Treasury Stock—Common
=
(3,280 x $13)
=
$42,640
Top of Form
Prepare the journal entries for the following. (Credit account
titles are automatically indented when amount is entered. Do

126. not indent manually.)
(1)
Issuance of preferred stock for cash.
(2)
Issuance of common stock for cash.
(3)
Purchase of common treasury stock for cash.
No.
Account Titles and Explanation
Debit
Credit
1.
2.

127. 3.
Bottom of Form
Prepare the stockholders’ equity section of the balance sheet at
December 31, 2014.
PRINGLE CORPORATION
Partial Balance Sheet
December 31, 2014

128. $

129. Total Capital Stock
$

130. $
TOTAL ADDITIONAL PAID IN CAPITAL

131. TOTAL PAID IN CAPITAL
TOTAL PAID IN CAPITAL AND RETAIN EARNINGS

132. :
Top of Form
TOTAL STOCKHOLDERS EQUITY
$
Bottom of Form
Question 7
On January 1, 2014, Everett Corporation had these
stockholders’ equity accounts.
Common Stock ($10 par value, 65,500 shares issued and
outstanding)

133. $655,000
Paid-in Capital in Excess of Par Value
498,200
Retained Earnings
692,400
During the year, the following transactions occurred.
Jan. 15
Declared a $0.60 cash dividend per share to stockholders of
record on January 31, payable February 15.
Feb. 15
Paid the dividend declared in January.
Apr. 15
Declared a 10% stock dividend to stockholders of record on
April 30, distributable May 15. On April 15, the market price of
the stock was $15 per share.
May 15
Issued the shares for the stock dividend.
Dec. 1
Declared a $0.70 per share cash dividend to stockholders of
record on December 15, payable January 10, 2015.
Dec. 31
Determined that net income for the year was $397,600.
Journalize the transactions. (Record entries in the order
displayed in the problem statement. Credit account titles are
automatically indented when amount is entered. Do not indent

134. manually.)
Date
Account Titles and Explanation
Debit
Credit

136. (To close net income)
(To close stock dividends)

137. Top of Form
(To close cash dividends)
Bottom of Form
Enter the beginning balances and post the entries to the
stockholders’ equity T-accounts. (Post entries in the order of
journal entries posted in the previous part)
Common Stock

138. Retained Earnings

139. Paid-in Capital in Excess of Par Value
Cash Dividends

140. Common Stock Dividends Distributable

141. Stock Dividends
Top of Form
Bottom of Form
Prepare the stockholders’ equity section of the balance sheet at
December 31.
EVERETT CORPORATION
Partial Balance Sheet

142. December 31, 2014
$

143. Top of Form
$
Bottom of Form
Top of Form
Calculate the payout ratio and return on common stockholders’

144. equity. (Round answers to 1 decimal place, e.g. 12.5%.)
Payout ratio
%
Return on common stockholders’ equity
%
Bottom of Form
C
C
39,300
Stock Divid
98,250
Common St
175,380
65,500

145. Paid-in Cap
32,750
Common St
65,500
Common St
65,500
Cash Divide
50,435
Dividends P
50,435
Income Sum
397,600
Retained Ea
397,600
Retained Ea
Preferred S
98,250

146. Stock Divid
98,250
Retained Ea
89,735
Cash Divide
89,735
655,000
65,500
720,500
98,250
154,500
692,400
89,735
397,600
902,015
498,200
32,750
530,950

147. 39,300
Paid-in Cap
89,735
50,435
0
65,500
65,500
0
98,250
98,250
0
Common St
720,500
Paid-in Cap
530,950
20,880
1,251,450
Retained Ea

148. 902,015
2,153,465
22.6
19.9
Cash
3,565,000
Common St
1,930,000
Paid-in Cap
1,635,000
Treasury S
42,640
Cash
42,640
Preferred Stoc
154,500
Common Stock
1,930,000

149. 2,084,500
Paid-in Capital
20,880
Paid-in Capital
1,635,000
1,655,880
30
3,740,380
Retained Earn
85,000
3,825,380
Treasury Stoc
42,640
3,782,740
Cash Divide
39,300
Dividends P
Cash

150. 39,300
Dividends P
39,300
Cash