ACC 206 Week 1

ACC 206 Week 1 Quiz

Assignments

P12-30AIssuing stock and preparing the stockholders equity section of the balance sheet [1520 min]

Lincoln-Priest, Inc., was organized in 2011. At December 31, 2011, the Lincoln-Priest balance sheet reported the following stockholders equity:

Requirements

1.During 2012, the company completed the following selected transactions. Journalize each transaction. Explanations are not required.

a.Issued for cash 1,300 shares of preferred stock at par value.

b.Issued for cash 2,400 shares of common stock at a price of $5 per share.

c.Net income for the year was $74,000, and the company declared no dividends. Make the closing entry for net income.

2.Prepare the stockholders equity section of the Lincoln-Priest balance sheet at December 31, 2012.

P12-32A Computing dividends on preferred and common stock [1520 min]

Fashonista Skincare has 10,000 shares of 3%, $20 par value preferred stock and 90,000 shares of $2 par common stock outstanding. During a three-year period, Fashionista declared and paid cash dividends as follows: 2010, $3,000; 2011, $13,000; and 2012, $17,000.

Requirements

1.Compute the total dividends to preferred and to common for each of the three years if

a.preferred is noncumulative.

b.preferred is cumulative.

2.For requirement 1.b., journalize the declaration of the 2012 dividends on December 22, 2012, and payment on January 14, 2013. Use separate Dividends payable accounts for preferred and common.

P13-24A Journalizing stockholders equity transactions [2025 min]

Summerborn Manufacturing, Co., completed the following transactions during 2012:

Requirement

1.Record the transactions in Summerborn's general journal.

P13-25A Journalizing dividend and treasury stock transactions, and preparing stockholders equity [1030 min]

The balance sheet of Lennox Health Foods, at December 31, 2011, reported 120,000 shares of no-par common stock authorized, with 25,000 shares issued and a Common stock balance of $190,000. Retained earnings had a balance of $115,000. During 2012, the company completed the following selected transactions:

Mar 15 Purchased 9,000 shares of treasury stock at $8 per share.

Apr 30 Distributed a 10% stock dividend on the outstanding shares of common stock.

The market value of common stock was $9 per share.

Dec 31 Earned net income of $110,000 during the year. Closed net income to Retained earnings.

Requirements

1.Record the transactions in the general journal. Explanations are not required.

2.Prepare the stockholders equity section of Lennox Health Foods balance sheet at December 31, 2012.

Discussion Question

Ethical Issue 12-1

Note: This case is based on an actual situation.

Stan Sewell paid $50,000 for a franchise that entitled him to market software programs in the countries of the European Union. Sewell intended to sell individual franchises for the major language groups of Western EuropeGerman, French, English, Spanish, and Italian. Naturally, investors considering buying a franchise from Sewell asked to see the financial statements of his business.

Believing the value of the franchise to be $500,000, Sewell sought to capitalize his own franchise at $500,000. The law firm of St. Charles & LaDue helped Sewell form a corporation chartered to issue 500,000 shares of common stock with par value of $1 per share. Attorneys suggested the following chain of transactions:

a.Sewell's cousin, Bob, borrows $500,000 from a bank and purchases the franchise from Sewell.

b.Sewell pays the corporation $500,000 to acquire all its stock.

c.The corporation buys the franchise from Cousin Bob.

d.Cousin Bob repays the $500,000 loan to the bank.

In the final analysis, Cousin Bob is debt-free and out of the picture. Sewell owns all the corporation's stock, and the corporation owns the franchise. The corporation's balance sheet lists a franchise acquired at a cost of $500,000. This balance sheet is Sewell's most valuable marketing tool.

Requirements

1.What is unethical about this situation?

2.Who can be harmed? How can they be harmed? What role does accounting play?