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ACC291 W4 E11-15 P11-6A E12-2 E12-4

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Resources: Ch. 11 & 12 of Financial Accounting.
Complete Exercises E11-15, E12-2, & E12-4.
Complete Problem 11-6A.

E11-15 On October 31, the stockholders’ equity section of Omar Company consists of common
stock $600,000 and retained earnings $900,000. Omar is considering the following two
courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares outstanding,
or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current
market price is $14 per share.

Instructions
Prepare a tabular summary of the effects of the alternative actions on the components of stockholders’
equity and outstanding shares. Use the following column headings: Before Action,After

Stock Dividend, and After Stock Split.


P11-6A Arnold Corporation has been authorized to issue 40,000 shares of $100 par value, 8%,
noncumulative preferred stock and 2,000,000 shares of no-par common stock. The corporation
assigned a $5 stated value to the common stock. At December 31, 2011, the ledger contained the
following balances pertaining to stockholders’ equity.

Preferred Stock   240,000
Paid-in Capital in Excess of Par Value—Preferred   56,000
Common Stock   2,000,000
Paid-in Capital in Excess of Stated Value—Common   5,700,000
Treasury Stock—Common (1,000 shares)   22,000
Paid-in Capital from Treasury Stock   3,000
Retained Earnings   560,000

The preferred stock was issued for land having a fair market value of $296,000.All common stock
issued was for cash. In November, 1,500 shares of common stock were purchased for the treasury
at a per share cost of $22. In December, 500 shares of treasury stock were sold for $28 per share.
No dividends were declared in 2011.

Instructions
(a) Prepare the journal entries for the:
(1) Issuance of preferred stock for land.
(2) Issuance of common stock for cash.
(3) Purchase of common treasury stock for cash.
(4) Sale of treasury stock for cash.
(b) Prepare the stockholders’ equity section at December 31, 2011.

E12-2 Foren Corporation had the following transactions pertaining to debt investments.
Jan. 1 Purchased 50 8%, $1,000 Choate Co. bonds for $50,000 cash plus brokerage fees of
$900. Interest is payable semiannually on July 1 and January 1.
July 1 Received semiannual interest on Choate Co. bonds.
July 1 Sold 30 Choate Co. bonds for $34,000 less $500 brokerage fees.

Instructions
(a) Journalize the transactions.
(b) Prepare the adjusting entry for the accrual of interest at December 31.

E12-4 Dossett Company had the following transactions pertaining to stock investments.
Feb. 1 Purchased 600 shares of Goetz common stock (2%) for $6,000 cash, plus brokerage
fees of $200.
July 1 Received cash dividends of $1 per share on Goetz common stock.
Sept. 1 Sold 300 shares of Goetz common stock for $4,400, less brokerage fees of $100.
Dec. 1 Received cash dividends of $1 per share on Goetz common stock.

Instructions
(a) Journalize the transactions.
(b) Explain how dividend revenue and the gain (loss) on sale should be reported in the income
statement.

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