1. UOP ACC 291 Week 4 Exercise E11-2, E11-5, E11-7, E11-13 NEW
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Journalize issuance of common stock and preferred stock and
purchase of treasury stock.
E11-2 Sagan Co. had these transactions during the current
period.
June 12 Issued 80,000 shares of $1 par value common stock for
cash of $300,000.
July 11 Issued 3,000 shares of $100 par value preferred stock
for cash at $106 per share.
Nov. 28 Purchased 2,000 shares of treasury stock for $9,000.
Prepare correct entries for capital stock transactions.
E11-5 Mesa 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.
Compare effects of a stock dividend and a stock split.
E11-7 On October 31, the stockholders' equity section of
Manolo Company's balance sheet consists of common stock
2. $648,000 and retained earnings $400,000. Manolo is
considering the following two courses of action: (1) declaring a
5% stock dividend on the 81,000 $8 par value shares
outstanding or (2) effecting a 2‐for‐1 stock split that will
reduce par value to $4 per share. The current market price is
$17 per share.
Instructions
Prepare a tabular summary of the effects of the alternative
actions on the company's stockholders' equity and outstanding
shares. Use these column headings: Before Action, After Stock
Dividend, and After Stock Split.
Calculate ratios to evaluate profitability and solvency.
E11-13 Kojak Corporation decided to issue common stock and
used the $300,000 proceeds to redeem all of its outstanding
bonds on January 1, 2017. The following information is
available for the company for 2017 and 2016.
(a) Compute the return on common stockholders' equity for
both years.
(b) Explain how it is possible that net income increased but the
return on common stockholders' equity decreased.
(c) Compute the debt to assets ratio for both years, and
comment on the implications of this change in the company's
solvency.
