会计学原理Financial Accounting by Robert Libby第八版 第十一章 答案.docx
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会计学原理FinancialAccountingbyRobertLibby第八版第十一章答案
Chapter11
ReportingandInterpretingOwners’Equity
ANSWERSTOQUESTIONS
1.Acorporationisaseparatelegalentity(authorizedbylawtooperateasanindividual).Itis ownedbyanumberofpersonsand/orentitieswhoseownershipisevidencedbysharesof capitalstock.Itsprimaryadvantagesare:
(a)transferabilityofownership,(b)limitedliabilitytotheowners,and(c)theabilitytoaccumulatelargeamountsofresources.
2.Thecharterofacorporationisalegaldocumentfromthestatethatauthorizesitscreationasaseparatelegalentity.Thecharterspecifiesthenameoftheentity,itspurpose,andthekindsandnumberofsharesofcapitalstockitcanissue.
3.(a)Authorizedcapitalstock—themaximumnumberofsharesofstockthatcanbesoldandissuedasspecifiedinthecharterofthecorporation.
(b)Issuedcapitalstock—thetotalnumberofsharesofcapitalstockthathavebeenissuedbythecorporationataparticulardate.
(c)Outstandingcapitalstock—thenumberofsharescurrentlyownedbythestockholders.
4.Commonstock—theusualornormalstockofthecorporation.Itisthevotingstockandgenerallyranksafterthepreferredstockfordividendsandassetsdistributedupondissolution.Oftenitiscalledtheresidualequity.Commonstockmaybeeitherparvalueorno-parvalue.
Preferredstock—whenoneormoreadditionalclassesofstockareissued,theadditionalclassesarecalledpreferredstock.Preferredstockhasmodificationsthatmakeitdifferentfromcommonstock.Generally,preferredstockhasbothfavorableandunfavorablefeaturesincomparisonwithcommonstock.Preferredstockusuallyisparvaluestockandusuallyspecifiesadividendratesuchas“6%preferredstock.”
5.Parvalueisanominalpershareamountestablishedforthecommonstockand/orpreferredstockinthecharterofthecorporation,andisprintedonthefaceofeachstockcertificate.Thestockthatissoldbyacorporationtoinvestorsaboveparvalueissaidtohavesoldatapremium,whilestockthatissoldbelowparissaidtohavesoldatadiscount.Thelawsofpracticallyallstatesforbidtheinitialsaleofstockbyacorporationtoinvestorsbelowparvalue.No-parvaluestockdoesnothaveanamountpersharespecifiedinthecharter.Asaconsequence,itmaybeissuedatanypricewithoutinvolvingadiscountorapremium.Itavoidsgivingtheimpressionofavaluethatisnotpresent.
6.Theusualcharacteristicsofpreferredstockare:
(1)dividendpreferences,
(2)conversionprivileges,(3)assetpreferences,and(4)nonvotingspecifications.
7.Thetwobasicsourcesofstockholders’equityare:
Contributedcapital—theamountinvestedbystockholdersbypurchasefromthecorporationofsharesofstock.Itiscomprisedoftwoseparateelements:
(1)theparorstatedamountderivedfromthesaleofcapitalstock(commonorpreferred)and
(2)theamountreceivedinexcessofparorstatedvalue.
Retainedearnings—theaccumulatedamountofallnetincomesincetheorganizationofthecorporation,lesslossesandlesstheaccumulatedamountofdividendspaidbythecorporationsinceorganization.
8.Stockholders’equityisaccountedforintermsofsource.Thismeansthatseveralaccountsaremaintainedforthevarioussourcesofstockholders’equity,suchascommonstock,preferredstock,contributedcapitalinexcessofpar,andretainedearnings.
9.Treasurystockisacorporation’sowncapitalstockthatwassold(issued)andsubsequentlyreacquiredbythecorporation.Corporationsfrequentlypurchasesharesoftheirowncapitalstockforsoundbusinessreasons,suchastoobtainsharesneededforemployees’bonusplans,toinfluencethemarketpriceofthestock,toincreaseearningspershareamounts,andtohavesharesonhandforuseintheacquisitionofothercompanies.Treasurystock,whileheldbytheissuingcorporation,confersnovoting,dividend,orotherstockholderrights.
10.Treasurystockisreportedonthebalancesheetunderstockholders’equityasadeduction;thatis,ascontrastockholders’equity.Any“gainorloss”ontreasurystockthathasbeensoldisreportedonthefinancialstatementsasanadditiontocontributedcapitalifagain;ifaloss,itisdeductedfromanypreviouscontributedcapital,orotherwisefromretainedearnings.
11.Thetwobasicrequirementstosupportacashdividendare:
(1)cashonhandortheabilitytoobtaincashsufficienttopaythedividendand
(2)asufficientbalanceinretainedearnings,becausethedividendrepresentsareturnofearningstothestockholders.Acashdividendreducesboththeassetsofacorporationandstockholders’equitybytheamountofthedividend.
12.Cumulativepreferredstockhasadividendpreferencesuchthat,shouldthedividendsonthepreferredstockforanyyear,orseriesofyears,notbepaid,dividendscannotbepaidtothecommonstockholdersuntilallsuchdividendsinarrearsarepaidtothepreferredstockholders.Noncumulativepreferredstockdoesnothavethispreference;therefore,dividendsnotpaidinpastperiodswillneverbepaidtothepreferredstockholders.
13.Astockdividendinvolvestheissuancetothestockholdersofadividendinthecorporation’sownstock(ratherthancash).Astockdividendissignificantlydifferentfromacashdividendinthatthecorporationdoesnotdisburseanyassets,whileinthecaseofacashdividend,cashisdecreasedbytheamountofthedividend.Acashdividendalsoreducestotalstockholders’equitybytheamountofthedividend.Incontrast,astockdividenddoesnotchangetotalstockholders’equity.
14.Theprimarypurposesforissuingastockdividendare:
(1)tomaintaindividendconsistency;thatis,topaydividendseachyeareitherincashorincapitalstock,and
(2)tocapitalizeretainedearnings;thatis,astockdividendrequiresatransferfromtheRetainedEarningsaccounttothepermanentcontributedcapitalaccountsfortheamountofthedividend.Althoughthistransferdoesnotchangestockholders’equityintotal,itdoescauseashiftfromretainedearningstocontributedcapital.
15.Whenadividendisdeclaredandpaid,thethreeimportantdatesare:
Declarationdate—thedateonwhichtheboardofdirectorsvotesthedividend.Inthecaseofacashdividend,adividendliabilitycomesintoexistenceonthisdateandmustberecordedasadebittoRetainedEarningsandasacredittoDividendsPayable.
Dateofrecord—thisdateusuallyisaboutonemonthafterthedateofdeclaration.Itisthedateonwhichthecorporationextractsfromitsstockholders’recordsthelistofindividualsowningshares.Thedividendispaidonlytothosenameslistedontherecorddate.Noentryintheaccountsismadeonthisdate.
Dateofpayment—thedateonwhichthecashisdisbursedtopaythedividend.Itfollowsthedateofrecordasspecifiedinthedividendannouncement.TheentrytorecordthecashdisbursementforthedividendisadebittoDividendsPayableandacredittoCash.
16.Retainedearningsistheaccumulatedamountofallnetincomeofthecorporationlessalllossesandlesstheaccumulatedamountofalldividendsdeclaredtodate.Theprimarycomponentsofretainedearningsare:
beginningbalance,plusnetincome,lessnetlosses,minusdividendsdeclared,equalstheendingbalance.
ANSWERSTOMULTIPLECHOICE
1.c)
2.d)
3.b)
4.a)
5.c)
6.b)
7.c)
8.c)
9.d)
10.a)
Authors’RecommendedSolutionTime
(Timeinminutes)
Miniexercises
Exercises
Problems
Alternate
Problems
Casesand
Projects
No.
Time
No.
Time
No.
Time
No.
Time
No.
Time
1
5
1
15
1
45
1
45
1
30
2
5
2
15
2
45
2
30
2
30
3
5
3
30
3
45
3
30
3
20
4
5
4
30
4
60
4
35
4
20
5
5
5
20
5
30
5
20
6
5
6
20
6
30
6
30
7
5
7
45
7
30
7
*
8
5
8
15
8
45
9
5
9
30
9
20
10
5
10
15
10
20
11
20
11
30
12
20
12
45
13
20
14
30
15
30
16
30
17
20
18
30
19
20
21
22
23
24
25
20
15
15
20
20
15
15
*Duetothenatureofthisproject,itisverydifficulttoestimatetheamountoftimestudentswillneedtocompletetheassignment.Aswithanyopen-endedproject,itispossibleforstudentstodevotealargeamountoftimetotheseassignments.Whilestudentsoftenbenefitfromtheextraeffort,wefindthatsomebecomefrustratedbytheperceiveddifficultyofthetask.Youcanreducestudentfrustrationandanxietybymakingyourexpectationsclear.Forexample,whenourgoalistosharpenresearchskills,wedevoteclasstimetodiscussingresearchstrategies.Whenwewantthestudentstofocusonarealaccountingissue,weoffersuggestionsaboutpossiblecompaniesorindustries.
MINI-EXERCISES
M11–1.
Stockholdersmay:
a)Voteinthestockholders’meeting(orbyproxy)onmajorissuesconcerningmanagementofthecorporation.
b)Participateproportionatelywithotherstockholdersinthedistributionofthecorporation’sprofits.
c)Shareproportionatelywithotherstockholdersinthedistributionofcorporateassetsuponliquidation.
Beingabletovoteisthemostimportantoftherightsbecausethisensuresthattheownershaveaninputatthestockholders’meetingandsomecontrolofthemanagementofthecorporation,thusenablingthemtoprotecttheirrightsasstockholders.
M11–2.
Unissuedshares=90,000(268,000–178,000)
M11–3.
Cash(170,000$21)(+A)
3,570,000
CommonStock(170,000$1)(+SE)
170,000
CapitalinExcessofPar(+SE)
3,400,000
Thejournalentrywouldbed