Jakarta Corporation decided to issue common stock and used the $120,000 proceeds to retire all of its outstanding bonds on January 1, 2021. The following information is available for the company for 2020 and 2021. 2021 2020 Net income $120,000 $100,000 Average stockholders' equity 1,000,000 800,000 Total assets 1,200,000 1,200,000 Current liabilities 100,000 100,000 Total liabilities 360,000 480,000 Instructions (1) Compute the return on common stockholders' equity for both years. (2) Explain how it is possible that net income increased, but the return on common stockholders' equity decreased. (3) Compute the debt to assets ratio for both years, and comment on the implications of this change in the company's solvency.
Q: The Maria Incorporated was established in 2018. The Corporation issued 100,000, ₱20 par value shares…
A: Solution: Statement of Changes in Equity of Maria Incorporated for the year 2019 is as under:
Q: Gall Corporation paid dividends of P500,000 and P1,600,000 at the end of 2021 and 2022,…
A: The dividends are declared from the retained earnings of the business.
Q: Smallville Company was organized on January 1, 2020. It is authorized to issue 109000 shares of $110…
A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…
Q: Green Corporation is authorized to issue 120,000 common shares and 80,000, $4 preferred shares. At…
A: Shareholder’s Equity: It can be referred to as one of the parts of the balance sheet other than the…
Q: short-term debt should be presented
A: Adjusting events are events occurring after the balance sheet date, before the issue of financial…
Q: a) Journalize the transactions for the month of April. (Assume that the company follows perpetual…
A: Journal entry: Journal entry is the book of original entry where first transactions are recorded in…
Q: Hardstone Inc. had excess cash and invested it in the stock of Softrock, Inc. On August 5, 2021…
A: The excess cash available with the firm can be invested in financial assets for a short-term period…
Q: WHITE Company began operations on January 1, 2021 with P1,000,000 from the issuance of shares and…
A: We know; as per accounting equation- Total Liabilities + Shareholders' equity = Total Assets
Q: Quadrant Corporation paid dividends of P2,000,000 and P3,000,000 at the end of 2019 and 2020,…
A: Preference shareholders receive dividends first on preference and then the remaining dividend will…
Q: The Alford Group had 270,000 shares of common stock outstanding at January 1, 2021. The following…
A: Earnings per share means for each and every share, how much earnings or net income is attributable.…
Q: Quadrant Corporation paid dividends of P2,000,000 and P3,000,000 at the end of 2019 and 2020,…
A: Given that, Dividend declared for the year 2019 = P2000000 Dividend declared for the year 2020 =…
Q: ,500,000 of
A: Income Statement: The requirement is to compute the total adjustment amount of events. The loss due…
Q: The Ohana Corporation has 20,000 shares of common stock outstanding throughout 2021. In addition,…
A: Diluted EPS = Net Income+After Tax Cost of InterestCommon Shares Outstanding + Additional shares to…
Q: A partial list of the accounts and ending account balances taken from the post-closing trial balance…
A: Shareholders Equity Equity held by shareholders refers to the sum that a company's founders have…
Q: On January 1, 2019, Mulcahy Manufacturing Inc., a newly formed corporation, issued 1,000shares of…
A: Balance Sheet (Extracts) Stockholder' Equity: Amount Common Stock $ 150,000 Retained…
Q: Montrose Construction Ltd. had 64,000 common shares and 22,000 preferred shares outstanding on…
A: Earnings per share is one of the important calculation being made in business. It shows how much…
Q: On December 31, 2020, McDaniel Company had $1,200,000 of short-term debt in the form of notes…
A: Definition: Liability: Liability is an agreement made by a company to pay a certain amount for the…
Q: On January 1, 2019, Metlock issued 10-year, $300,000 face value, 6% bonds at par. Each $1,000 bond…
A: Solution Concept We know Basic earning per share = earning available for equity…
Q: Unit IV question 9
A: Journal entry - It refers to the process where the business transactions are recorded in the books…
Q: Anderson Steel Company began 2021 with 600,000 shares of common stock outstanding. On March 31,…
A:
Q: The corporation was established in 2019. The Corporation issued 100,000, 20 par value shares…
A: Statement of changes in equity is one of the financial statement of business, which shows all…
Q: Swifty Corporation, has 14100 shares of 4%, $100 par value, cumulative preferred stock and 61000…
A: Cumulative preference shares are those shareholders whose dividend has been accumulated and paid in…
Q: Anderson Steel Company began 2021 with 600,000 shares of common stock outstanding. On March 31,…
A:
Q: On January 1, 2020, Bonita Company issued 10-year, $1,810,000 face value, 6% bonds, at par. Each…
A: (a) Calculate Diluted Earnings Per Share for 2020.
Q: On December 31, 2019. Cullumber Corporation had 141.600 common shares outstanding On April 30, 2020,…
A: Profitability of an entity can be calculated by earnings per share where it shows earnings of the…
Q: Anderson Steel Company began 2021 with 570,000 shares of common stock outstanding. On March 31,…
A: Basic earnings per share Basic earnings per share is calculated considering the outstanding shares…
Q: On January 1, 2021, Coronado Industries had 124000 shares of its $5 par value common stock…
A: Stock dividends: Stock dividends are the number of shares issued by a company to the existing…
Q: the dusty corporation began business on January 1, 2020. the corporate charter authorizes issuance…
A: Journal entries are the entries to be recorded in the accounting of the business for all the…
Q: At December 31, 2021, the financial statements of Hollingsworth Industries included the following: $…
A: Diluted EPS Diluted EPS is used to evaluate the quality of a company's profits per share after all…
Q: Gall Corporation paid dividends of P500,000 and P1,600,000 at the end of 2021 and 2022,…
A: Annual Dividend to Preferred shareholders = No. of preferred share outstanding x Par value per share…
Q: An investor company purchased 121,000 of the 250,000 outstanding shares of the investee company's…
A: Owners’ equity: It is a owner's value and amount invested by an individual in the firm. It is…
Q: On January 1, 2020, Crocker Company issued 10-year, $2,000,000 face value, 6% bonds, at par. Each…
A: Interest on bonds = Face value x rate of interest = $2,000,000 x 6% = $120,000 Saving in interest…
Q: Gall Corporation paid dividends of P500,000 and P1,600,000 at the end of 2021 and 2022,…
A: Calculation of dividend payble to preference shareholders >> (50,000 *100*12%) = 600,000 But…
Q: The balance in the retained earnings account of Indigo Corporation was P450,000 at December 31,…
A: Treasury stock: Shares which are bought back by the company from the open market but not retired…
Q: Anderson Steel Company began 2018 with 600,000 shares of common stock outstanding. On March 31,…
A:
Q: cash dividends shall the ordinary shareholders
A: Cash dividends received by preference shareholders = Amount of outstanding preference shares * Rate…
Q: Abajo, Inc. went into business on January 1, 2017 when it issued 100 shares of stock for $10,000. No…
A: Return on Equity = Net IncomeShareholder's Equity it is the measure of financial performance and it…
Q: T Corporation is authorized to issue 500,000 common stock at $10 par value. As of December 31, 2019…
A: A journal entry is the first step in chronicling financial transactions in the books of business…
Q: Marigold Corp. had 307000 shares of common stock issued and outstanding at December 31, 2020. During…
A:
Q: On January 1, 2019, Ventionary issued bonds with an estimated value of 10 years, $ 3,000,000 (face…
A: Compute diluted earnings per share for 2019: Formula: net income after tax saving / total…
Q: Quadrant Corporation paid dividends of P2,000,000 and P3,000,000 at the end of 2019 and 2020,…
A: Given that preference shares are cumulative in nature. So if the preference shares are cumulative in…
Q: On January 1, 2020, Star Corp. sold 10,000 shares of common stock, par $2, at $18 per share. On…
A: Under the treasury stock method, the common stock are held as treasury stock and they are not…
Q: Davao Company was incorporated on July 1, 2021, with P2,000,000 from the issuance of shares and…
A: Answer) Calculation of Total Assets Total Assets = Total Liabilities + Shareholders’ Equity Total…
Q: Peaceful Enterprises financial statements for the year ended December 31, 2021 are authorized for…
A: Adjustment entries after reporting period According IFRS there must some guidelines which are issued…
Q: Listed below are the transactions that affected the shareholders’ equity of Branch-Rickie…
A: Number of shares ( July 12 , 2022 ) ( in '000 ) = 117000 * 6% = 7020
Q: The company reported total assets of P2,100,000 and total liabilities of P1,360,000 in its December…
A: Stockholders’ Equity on December 31, 2020 = total assets- total liabilities = P2,100,000 -…
Q: During the year ended December 31, 2020, Gluco Inc. split its stock on a 3-for-1 basis. In its…
A: Net income: The bottom line of income statement which is the result of excess of earnings from…
Q: Quadrant Corporation paid dividends of P2,000,000 and P3,000,000 at the end of 2019 and 2020,…
A: Cumulative preference share can enjoy the right of any unpaid dividend on their share capital.…
Q: Peaceful Enterprises financial statements for the year ended December 31, 2021 are authorized for…
A: Adjusting events are those events that occurs after reporting date ( i.e. balance sheet date ) but…
Q: On May 31, 2020, Dana Company paid $ 550,000 cash and issues 15,000 shares of its stock with a…
A: A business combination can be defined as a system of amalgamation of firms under common control. The…
Jakarta Corporation decided to issue common stock and used the $120,000 proceeds to retire all of its outstanding bonds on January 1, 2021. The following information is available for the company for 2020 and 2021.
| 2021 | 2020 | |
| Net income | $120,000 | $100,000 |
| Average |
1,000,000 | 800,000 |
| Total assets | 1,200,000 | 1,200,000 |
| Current liabilities | 100,000 | 100,000 |
| Total liabilities | 360,000 | 480,000 |
Instructions
(1) Compute the return on common stockholders' equity for both years.
(2) Explain how it is possible that net income increased, but the return on common stockholders' equity decreased.
(3) Compute the debt to assets ratio for both years, and comment on the implications of this change in the company's solvency.
Step by step
Solved in 2 steps
- Comprehensive The following are Farrell Corporations balance sheets as of December 31, 2019, and 2018, and the statement of income and retained earnings for the year ended December 31, 2019: Additional information: a. On January 2, 2019, Farrell sold equipment costing 45,000, with a book value of 24,000, for 19,000 cash. b. On April 2, 2019, Farrell issued 1, 000 shares of common stock for 23,000 cash. c. On May 14, 2019, Farrell sold all of its treasury stock for 25,000 cash. d. On June 1, 2019, Farrell paid 50, 000 to retire bonds with a face value (and book value) of 50, 000. e. On July 2, 2019, Farrell purchased equipment for 63, 000 cash. f. On December 31, 2019, land with a fair market value of 150,000 was purchased through the issuance of a long-term note in the amount of 150,000. The note bears interest at the rate of 15% and is due on December 31, 2021. g. Deferred taxes payable represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial statement reporting. Required: 1. Prepare a spreadsheet to support a statement of cash flows for Farrell for the year ended December 31, 2019, based on the preceding information. 2. Prepare the statement of cash flows. (Appendix 21.1) Spreadsheet and Statement Refer to the information for Farrell Corporation in P21-13. Required: 1. Using the direct method for operating cash flows, prepare a spreadsheet to support a 2019 statement of cash flows. (Hint: Combine the income statement and December 31, 2019, balance sheet items for the adjusted trial balance. Use a retained earnings balance of 291,000 in this adjusted trial balance.) 2. Prepare the statement of cash flows. (A separate schedule reconciling net income to cash provided by operating activities is not necessary.)Comprehensive The following are Farrell Corporations balance sheets as of December 31, 2019, and 2018, and the statement of income and retained earnings for the year ended December 31, 2019: Additional information: a. On January 2, 2019, Farrell sold equipment costing 45,000, with a book value of 24,000, for 19,000 cash. b. On April 2, 2019, Farrell issued 1,000 shares of common stock for 23,000 cash. c. On May 14, 2019, Farrell sold all of its treasury stock for 25,000 cash. d. On June 1, 2019, Farrell paid 50,000 to retire bonds with a face value (and book value) of 50,000. e. On July 2, 2019, Farrell purchased equipment for 63,000 cash. f. On December 31, 2019. land with a fair market value of 150,000 was purchased through the issuance of a long-term note in the amount of 150,000. The note bears interest at the rate of 15% and is due on December 31, 2021. g. Deferred taxes payable represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial statement reporting. Required: 1. Prepare a spreadsheet to support a statement of cash flows for Farrell for the year ended December 31, 2019, based on the preceding information. 2. Prepare the statement of cash flows.Frost Company has accumulated the following information relevant to its 2019 earningsper share. 1. Net income for 2019: 150,500. 2. Bonds payable: On January 1, 2019, the company had issued 10%, 200,000 bonds at 110. The premium is being amortized in the amount of 1,000 per year. Each 1,000 bond is currently convertible into 22 shares of common stock. To date, no bonds have been converted. 3. Bonds payable: On December 31, 2017, the company had issued 540,000 of 5.8% bonds at par. Each 1,000 bond is currently convertible into 11.6 shares of common stock. To date, no bonds have been converted. 4. Preferred stock: On July 3, 2018, the company had issued 3,800 shares of 7.5%, 100 par, preferred stock at 108 per share. Each share of preferred stock is currently convertible into 2.45 shares of common stock. To date, no preferred stock has been converted and no additional shares of preferred stock have been issued. The current dividends have been paid. 5. Common stock: At the beginning of 2019, 25,000 shares were outstanding. On August 3, 7,000 additional shares were issued. During September, a 20% stock dividend was declared and issued. On November 30, 2,000 shares were reacquired as treasury stock. 6. Compensatory share options: Options to acquire common stock at a price of 33 per share were outstanding during all of 2019. Currently, 4,000 shares may be acquired. To date, no options have been exercised. The unrecognized compens Frost Company has accumulated the following information relevant to its 2019 earnings ns is 5 per share. 7. Miscellaneous: Stock market prices on common stock averaged 41 per share during 2019, and the 2019 ending stock market price was 40 per share. The corporate income tax rate is 30%. Required: 1. Compute the basic earnings per share. Show supporting calculations. 2. Compute the diluted earnings per share. Show supporting calculations. 3. Indicate which earnings per share figure(s) Frost would report on its 2019 income statement.
- Hyde Corporations capital structure at December 31, 2018, was as follows: On July 2, 2019, Hyde issued a 10% stock dividend on its common stock and paid a cash dividend of 2.00 per share on its preferred stock. Net income for the year ended December 31, 2019, was 780,000. What should be Hydes 2019 basic earnings per share? a. 7.80 b. 7.09 c. 7.68 d. 6.73Anoka Company reported the following selected items in the shareholders equity section of its balance sheet on December 31, 2019, and 2020: In addition, it listed the following selected pretax items as a December 31, 2019 and 2020: The preferred shares were outstanding during all of 2019 and 2020; annual dividends were declared and paid in each year. During 2019, 2,000 common shares were sold for cash on October 4. During 2020, a 20% stock dividend was declared and issued in early May. At the end of 2019 and 2020, the common stock was selling for 25.75 and 32.20, respectively. The company is subject to a 30% income tax rate. Required: 1. Prepare the comparative 2019 and 2020 income statements (multiple-step), and the related note that would appear in Anokas 2020 annual report. 2. Next Level Compute the price/earnings ratio for 2020. How does this compare to 2019? Why is it different?On January 1, 2019, Kittson Company had a retained earnings balance of 218,600. It is subject to a 30% corporate income tax rate. During 2019, Kittson earned net income of 67,000, and the following events occurred: 1. Cash dividends of 3 per share on 4,000 shares of common stock were declared and paid. 2. A small stock dividend was declared and issued. The dividend consisted of 600 shares of 10 par common stock. On the date of declaration, the market price of the companys common stock was 36 per share. 3. The company recalled and retired 500 shares of 100 par preferred stock. The call price was 125 per share; the stock had originally been issued for 110 per share. 4. The company discovered that it had erroneously recorded depreciation expense of 45,000 in 2018 for both financial reporting and income tax reporting. The correct depreciation for 2018 should have been 20,000. This is considered a material error. Required: 1. Prepare journal entries to record Items 1 through 4. 2. Prepare Kittsons statement of retained earnings for the year ended December 31, 2019.
- Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of 2019, Tama had 15,000 shares of common stock outstanding; an additional 4,500 shares were issued on May 4. The 7% convertible bonds have a face value of 80,000 and were issued in 2016 at par. Each 1,000 bond is convertible into 25 shares of common stock; to date, none of the bonds have been converted. During 2019, the company earned net income of 79,200 and was subject to an income tax rate of 30%. Required: Compute the 2019 diluted earnings per share.Waseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight line method) and dividends on each security during 2019. Each of the convertible securities is described in the following table: Additional data: Net income for 2019 totaled 119,460. The weighted average number of common shares outstanding during 2019 was 40,000 shares. No share options or warrants arc outstanding. The effective corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which each of the convertible securities should be included in diluted earnings per share. 3. Compute basic earnings per share. 4. Compute diluted earnings per share. 5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2019 income statement.Roseau Company is preparing its annual earnings per share amounts to be disclosed on its 2019 income statement. It has collected the following information at the end of 2019: 1. Net income: 120,400. Included in the net income is income from continuing operations of 130,400 and a loss from discontinued operations (net of income taxes) of 10,000. Corporate income tax rate: 30%. 2. Common stock outstanding on January 1, 2019: 20,000 shares. 3. Common stock issuances during 2019: July 6, 4,000 shares; August 24, 3,000 shares. 4. Stock dividend: On October 19, 2019, the company declared a 10% stock dividend that resulted in 2,700 additional outstanding shares of common stock. 5. Common stock prices: 2019 average market price, 30 per share; 2019 ending market price, 27 per share. 6. 7% preferred stock outstanding on January 1, 2019: 1,000 shares. Terms: 100 par, nonconvertible. Current dividends have been paid. No preferred stock issued during 2019. 7. 8% convertible preferred stock outstanding on January 1, 2019: 800 shares. The stock was issued in 2018 at 130 per share. Each 100 par preferred stock is currently convertible into 1.7 shares of common stock. Current dividends have been paid. To date, no preferred stock has been converted. 8. Bonds payable outstanding on January 1, 2019: 100,000 face value. These bonds were issued several years ago at 97 and pay annual interest of 9.6%. The discount is being amortized in the amount of 300 per year. Each 1,000 bond is currently convertible into 22 shares of common stock. To date, no bonds have been converted. 9. Compensatory share options outstanding: Key executives may currently acquire 3,000 shares of common stock at 20 per share. The options were granted in 2018. To date, none have been exercised. The unrecognized compensation cost (net of tax) related to the options is 4 per share. Required: 1. Compute the basic earnings per share. Show supporting calculations. 2. Compute the diluted earnings per share. Show supporting calculations. 3. Show how Roseau would report these earnings per share figures on its 2019 income statement. Include an explanatory note to the financial statements.
- Monona Company reported net income of 29,975 for 2019. During all of 2019, Monona had 1,000 shares of 10%, 100 par, nonconvertible preferred stock outstanding, on which the years dividends had been paid. At the beginning of 2019, the company had 7,000 shares of common stock outstanding. On April 2, 2019, the company issued another 2,000 shares of common stock so that 9,000 common shares were outstanding at the end of 2019. Common dividends of 17,000 had been paid during 2019. At the end of 2019, the market price per share of common stock was 17.50. Required: 1. Compute Mononas basic earnings per share for 2019. 2. Compute the price/earnings ratio for 2019.During 2021, Anthony Company purchased debt securities as a long-term investment and classified them as trading. All securities were purchased at par value. Pertinent data are as follows: The net holding gain or loss included in Anthonys income statement for the year should be: a. 0 b. 3,000 gain c. 9,000 loss d. 12,000 lossThe controller of Red Lake Corporation has requested assistance in determining income, basic earnings per share, and diluted earnings per share for presentation on the companys income statement for the year ended September 30, 2020. As currently calculated, Red Lakes net income is 540,000 for fiscal year 2019-2020. Your working papers disclose the following opening balances and transactions in the companys capital stock accounts during the year: 1. Common stock (at October 1, 2019, stated value 10, authorized 300,000 shares; effective December 1, 2019, stated value 5, authorized 600,000 shares): Balance, October 1, 2019issued and outstanding 60,000 shares December 1, 201960,000 shares issued in a 2-for-l stock split December 1, 2019280,000 shares (stated value 5) issued at 39 per share 2. Treasury stockcommon: March 3, 2020purchased 40,000 shares at 38 per share April 1, 2020sold 40,000 shares at 40 per share 3. Noncompensatory stock purchase warrants, Series A (initially, each warrant was exchangeable with 60 for 1 common share; effective December 1, 2019, each warrant became exchangeable for 2 common shares at 30 per share): October 1, 201925,000 warrants issued at 6 each 4. Noncompensatory stock purchase warrants, Series B (each warrant is exchangeable with 40 for 1 common share): April 1, 202020,000 warrants authorized and issued at 10 each 5. First mortgage bonds, 5%, due 2029 (nonconvertible; priced to yield 5% when issued): Balance October 1, 2019authorized, issued, and outstandingthe face value of 1,400,000 6. Convertible debentures, 7%, due 2036 (initially, each 1,000 bond was convertible at any time until maturity into 20 common shares; effective December 1, 2019, the conversion rate became 40 shares for each bond): October 1, 2019authorized and issued at their face value (no premium or discount) of 2,400,000 The following table shows the average market prices for the companys securities during 2019-2020: Adjusted for stock split Required: Prepare a schedule computing: 1. the basic earnings per share 2. the diluted earnings per share that should be presented on Red Lakes income statement for the year ended September 30, 2020 A supporting schedule computing the numbers of shares to be used in these computations should also be prepared. Assume an income tax rate of 30%.