ACC291 Week6 E11-15, E12-1, E12-2, P11-6A

718 Words3 Pages
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.
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.

Title Before Action After Stock Dividend After Stock Split
Common Stock $600,000 $630,000
…show more content…
6. What is the typical stock investment when investing cash for strategic reasons?
A company might purchase an interest in another company in order to establish a presence in a specific industry or might attempt to purchase a large but not controlling interest in another company to generate influence over others. Sometimes, companies purchase stocks of other companies in an unrelated industry they might be interested in entering.

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.
(a) Journalize the transactions.
Title Debit Credit
January 1
Debt Investments 50,900
Cash $50,900

Title Debit Credit
July 1
Cash 2,000
Interest Revenue 2,000

Title Debit Credit
July 1
Cash 33,500
Debt Investments $30,540
Gain on Sale $2,960

(b) Prepare the adjusting entry for the accrual of interest at December 31.
Title Debit Credit
Dec. 31
Interest Receivable 800
Interest Revenue 800

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

    More about ACC291 Week6 E11-15, E12-1, E12-2, P11-6A

      Get Access