Financial Accounting
4th Edition
ISBN: 9780134125053
Author: Kemp, Robert S., Waybright, Jeffrey.
Publisher: Pearson Education,
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Chapter 10, Problem 10SC
To determine
Identify the effect of purchasing the
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Treasury Stock
A company purchases 1,980 shares of treasury stock for $5 per share.
Enter your answers as positive numbers.
Required:
1. How will this transaction affect stockholders' equity? If there is no effect, choose "No effect" and enter zero ("0").
2. How will this transaction affect net income? If there is no effect, choose "No effect" and enter zero ("0").
What effect will a two-for-one stock split have on the following items found on a firm's financial statements?
a. Earnings per share $5.00. Round your answer to the nearest cent.
Initial amount
$5.00
$
b. Total equity $10,000,000. Round your answer to the nearest dollar.
Initial amount
$
New amount
Initial amount
$4,000,000
New amount
$10,000,000
c. Long-term debt $4,600,000. Round your answer to the nearest dollar.
Effect
$
New amount
Effect
Initial amount
$4,600,000
$
d. Additional paid-in capital $1,689,000. Round your answer to the nearest dollar.
Effect
New amount
$
New amount
-Select-
Effect
New amount
Initial amount
$1,689,000
e. Number of shares outstanding 800,000. Round your answer to the nearest whole number.
Initial amount
800,000
f. Earnings $4,000,000. Round your answer to the nearest dollar.
Effect
-Select-
-Select-
-Select-
Effect
-Select-
-Select-
Jersey Medical earns $12.50 a share, sells for $100, and pays a $6 per share dividend. The stock is split two for one and a $3 per share cash dividend is declared.
a. What will be the new price of the stock? Round your answer to the nearest dollar.
$
b. If the firm's total earnings do not change, what is the payout ratio before and after the stock split? Round your answers to one decimal place.
Payout ratio before the split:
Payout ratio after the split:
%
%
Chapter 10 Solutions
Financial Accounting
Ch. 10 - What are the four baste rights of stockholders?Ch. 10 - Assume you are a CFO of a company that is...Ch. 10 - Prob. 3DQCh. 10 - What accounts, if any, are involved in the journal...Ch. 10 - With which type of stock would dividends in...Ch. 10 - What accounts are affected by the declaration and...Ch. 10 - What are some of the reasons for issuing a stock...Ch. 10 - Prob. 8DQCh. 10 - What could you reasonably conclude if a company...Ch. 10 - Prob. 10DQ
Ch. 10 - Prob. 1SCCh. 10 - Prob. 2SCCh. 10 - Prob. 3SCCh. 10 - Prob. 4SCCh. 10 - Prob. 5SCCh. 10 - Prob. 6SCCh. 10 - Prob. 7SCCh. 10 - Prob. 8SCCh. 10 - Prob. 9SCCh. 10 - Prob. 10SCCh. 10 - Prob. 11SCCh. 10 - Prob. 12SCCh. 10 - Stockholders' equity terminology (Learning...Ch. 10 - Stock issuance (Learning Objective 3) 5-10 min....Ch. 10 - Issuance of stock for cash and noncash assets...Ch. 10 - Prob. 4SECh. 10 - Prob. 5SECh. 10 - Prob. 6SECh. 10 - Prob. 7SECh. 10 - Prob. 8SECh. 10 - Prob. 9SECh. 10 - Prob. 10SECh. 10 - Prob. 11SECh. 10 - Prob. 12SECh. 10 - Prob. 13SECh. 10 - Prob. 14SECh. 10 - Prob. 15AECh. 10 - Prob. 16AECh. 10 - Prob. 17AECh. 10 - Prob. 18AECh. 10 - Prob. 19AECh. 10 - Prob. 20AECh. 10 - Prob. 21AECh. 10 - Accounting for cash and stock dividends (Learning...Ch. 10 - Prob. 23AECh. 10 - Prob. 24AECh. 10 - Prob. 25AECh. 10 - Accounting for treasury stock (Learning Objectives...Ch. 10 - Prob. 27AECh. 10 - Prob. 28AECh. 10 - Prob. 29AECh. 10 - Prob. 30AECh. 10 - Prob. 31BECh. 10 - Prob. 32BECh. 10 - Prob. 33BECh. 10 - Prob. 34BECh. 10 - Prob. 35BECh. 10 - Prob. 36BECh. 10 - Prob. 37BECh. 10 - Accounting for cash and stock dividends (Learning...Ch. 10 - Prob. 39BECh. 10 - Prob. 40BECh. 10 - Accounting for treasury stock (Learning Objectives...Ch. 10 - Prob. 42BECh. 10 - Prob. 43BECh. 10 - Prob. 44BECh. 10 - Prob. 45BECh. 10 - Prob. 46BECh. 10 - Prob. 47APCh. 10 - Prob. 48APCh. 10 - Prob. 49APCh. 10 - Prob. 50APCh. 10 - Prob. 51APCh. 10 - Prob. 52APCh. 10 - Prob. 53APCh. 10 - Prob. 54BPCh. 10 - Prob. 55BPCh. 10 - Prob. 56BPCh. 10 - Prob. 57BPCh. 10 - Prob. 58BPCh. 10 - Prob. 59BPCh. 10 - Prob. 60BPCh. 10 - Prob. 1CECh. 10 - Prob. 1CPCh. 10 - Prob. 1EIACh. 10 - Case 2. The board of directors for Atlantic...Ch. 10 - Prob. 1FACh. 10 - Prob. 1IACh. 10 - Prob. 1SBACh. 10 - Prob. 1WC
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- Ratio Analysis MJO Inc. has the following stockholders equity section of the balance sheet: On the balance sheet date, MJOs stock was selling for S25 per share. Required: Assuming MJOs dividend yield is 1%, what are the dividends per common share? Assuming MJOs dividend yield is 1% and its dividend payout is 20%, what is MJOs net income?arrow_forwardAlert Companys shareholders equity prior to any of the following events is as follows: The company is considering the following alternative items: 1. An 8% stock dividend on the common stock when it is selling for 30 per share. 2. A 30% stock dividend on the common stock when it is selling for 32 per share. 3. A special stock dividend to common shareholders consisting of 1 share of preferred stock for every 100 shares of common stock. The preferred stock and common stock are selling for 123 and 31 per share, respectively. 4. A 2-for-1 stock split on the common stock, reducing the par value to 5 per share (assume the same date for declaration and issuance). The market price is 30 per share on the common stock. 5. A property dividend to common shareholders consisting of 100 bonds issued by West Company. These bonds are carried on the Alert Company books as an available-for sale investment at a fair value of 48,000 (which is also its cost); it has a current value of 54,000. 6. A cash dividend, consisting of a normal dividend and a liquidating dividend, on both the preferred and the common stock. The 10% preferred dividend includes a 2% liquidating dividend, and the 2.30 per share common dividend includes a 0.30 per share liquidating dividend (separate liquidating dividend contra accounts should be used). Required: For each of the preceding alternative items: 1. Record (a) the journal entry at the date of declaration and (b) the journal entry at the date of issuance. 2. Compute the balances in the shareholders equity accounts immediately after the issuance (any gains or losses are to be reflected in the retained earnings balance; ignore income taxes).arrow_forwardAssume that you own 2,100 shares of $6 par value common stock and the company has a 3-for-1 stock split when the market price per share is $72. What will probably happen to the market price per share of the stock and the par value per share of the stock? Multiple Choice A. Market price per share will be about $216 per share, and par value will be $2 per share B. Market price per share will be about $216 per share, and par value will be $18 per share C. Market price per share will be about $24 per share, and par value will be $2 per share D. Market price per share will be about $24 per share, and par value will be $18 per sharearrow_forward
- Assume that an investor buys 100 shares of stock at $37 per share, putting up a 65% margin. a. What is the debit balance in this transaction? b. How much equity funds must the investor provide to make this margin transaction? c. If the stock rises to $59 per share, what is the investor's new margin position? a. The debit balance in this transaction is $ *** (Round to the nearest dollar.)arrow_forwardAssume that you own 3,600 shares of $10 par value common stock and the company has a 4 for 1 stock split when the market price share is $68.00. How many shares of common stock will you own after the stock split? What will probably happen to the market price per share of the stock? What will probably happen to the per value per share of the stock?arrow_forwardSavers has an issue of preferred stock with a $6.80 stated dividend that just sold for $88 per share. What is the bank's cost of preferred stock? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Cost of preferred stock %arrow_forward
- 7) What account should you debit when you declare a 2: 1 stock split on 100,000 common shares outstanding, par value is $2/share and selling price is $100/sh?arrow_forwardRequired: 5. The average per-share sales price of the common stock when issue $? per share 6. The cost of the treasury stock per share $? per share 7. The total stockholders' equity $? 8. The per-share book value of the common stock assuming that there are no dividends in arrears and that the preferred stock can be redeemed at its par value $? per sharearrow_forwardJersey Medical earns $9.00 a share, sells for $120, and pays a $6 per share dividend. The stock is split two for one and a $3 per share cash dividend is declared. What will be the new price of the stock? Round your answer to the nearest dollar. $ If the firm's total earnings do not change, what is the payout ratio before and after the stock split? Round your answers to one decimal place. Payout ratio before the split: % Payout ratio after the split: %arrow_forward
- ILI Selected Stocks from the Dow Jones Industrial Average for a Day in 2015 Name Apple Bosing Internationa 1 Business Machings Johnson General Electric Procter & Gamble Symbol Open High Low Close Not % Vohme chg Chg AFFL BA 113.8 115.0 113.6 115.0 1.73 151 4 1 1 1 146.4 5 3 IBM 140.4 143.7 2 N 1410 5 140.3 0 145.4 5.09 3.5 1 142.7 3.14 22 5 Li JNI 97.13 99.08 96.42 98.80 189 1.91 2 GE 28.74 29.52 28.70 29.36 0.72 558.320 0 52 988790 high 134.54 416541 00 697630 158.83 115.02 0 176.3 105.49 814764 31.49 52 PG 73.22 74.96 72.97 74.20 1.25 1.68 140809 86.78 low 92. Div 65.02 1.08 426 5.20 81.79 3.00 PE YID %chg 214 10.0 8.48 5 3.63 15.8 0.56 4.17 916 3.59 18.8 -197 18 3.16 16.9 -6.1 7 17.1-6.09 %arrow_forwardAssume the issuer incurs $1 million in otherexpenses to sell 3 million shares at $40 each to anunderwriter and the underwriter sells the shares at$43 each. By the end of the first day’s trading, theissuing company’s stock price had risen to $70.What is the total cost of underpricing?arrow_forwardA firm issues one new share (without cost) for every 10 shares that each shareholder is holding. What is this is an example of? Select one: a. a stock dividend b. a stock repurchase c. a reverse stock split d. a stock splitarrow_forward
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