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Alika [10]
3 years ago
15

Otis Thorpe Corporation has 10,000 shares of $100 par value, 8% preferred stock and 50,000 shares of $10 par value common stock

outstanding at December 31, 2014.
Answer the questions in each of the following independent situations.

(a) If the preferred stock is cumulative and dividends were last paid on the preferred stock on December 31, 2011, what are the dividends in arrears that should be reported on the December 31, 2014, balance sheet?
The dividends in arrears to be reported on the December 31, 2014​ = _______________
(b) If the preferred stock is convertible into 7 shares of $10 par value common stock and 4,000 shares are converted, what entry is required for the conversion assuming the preferred stock was issued at par value? (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
c) If the preferred stock was issued at $107 per share, how should the preferred stock be reported in the stockholders’ equity section? (Enter account name only and do not provide descriptive information.)
Business
1 answer:
s2008m [1.1K]3 years ago
4 0

Answer:

(a) Cumulative dividend is not reported in Balance sheet.

The dividends in arrears on December 31, 2014 is $240,000

(b) Preferred Stock (Dr.) $400,000

    Common Stock (Cr.) $280,000

     Paid in capital Excess of par (Cr.) $120,000.

(c) Cash (Dr.) $1,070,000

    Preferred Stock (Cr.) $1,000,000

    Paid in capital (Cr.) $70,000

Explanation:

a. Cumulative dividends on Preferred stocks are not declared and therefore they are not reported in Balance sheet of a company.

To calculate the dividends in arrears on December 31, 2014,

10,000 shares * $100 par value * 8% preferred stock. * 3 years arrears.

= $240,000.

b. Preferred stock conversion into common stock is recorded as common stock account in balance sheet.

Preferred stock conversion amount is 4,000 shares * $100 par value = $400,000. This is presented as debit entry.

The credit entry will be common stock account with $ 280,000 (4,000 * 7 shares conversion * $10 par value).

The difference in both entries will be recorded as paid in capital as credit.

c. When preferred stock is issued cash is increased so debit account will be cash (10,000 shares * $107 per share) and credit entry will be Preferred Stock account in balance sheet at par value (10,000 shares * $100 par value). The remaining is credited in paid in capital of preferred stock account  [10,000 shares * $7 ($107 - $100) per share].

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Answer and Explanation:

The presentation of the partial income statement is presented below:

                                                  Nash Corporation

                                            Partial income statement

Income from continuing operations    $10,813,600

Discontinued operations

Loss from operations of a division   $316,100

Loss from disposal of the division    $206,600                  ($522,700)

Net income                                         $10,290,900

Earning per share

Income from continuing operations                    

($10,813,600 ÷ 10,000,000 shares)        $1.08

Less Discontinued operations

($522,700 ÷ 10,000,000 shares)              -$0.05

Net income

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5 0
3 years ago
The trial balance of Barger Company at the end of the accounting period, immediately prior to recording closing entries, showed
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Answer: $30,600

Explanation:

First calculate the earnings for the year.

Revenue is given. Expenses are also given and come out of revenue. Dividends also come out of revenue as well.

Retained Earnings for the year is therefore,

Retained Earnings for the year = Revenue - Expenses - Dividends

= 62,000 - 44,900 - 2,300

Retained Earnings for the year = $14,800

This figure should be added to the retained earnings of the previous period to find the total balance.

= 14,800 + 15,800

= $30,600

$30,600 is the closing Balance on Retained Earnings after closing entries.

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