Paulson Company issues 7%, four-year bonds, on December 31, 2013, with a par value of $91,000 and semiannual interest payments. Semiannual Period-End Unamortized Discount Carrying Value (0) 12/31/2013 $ 6,553 $ 84,447 (1) 6/30/2014 5,734 85,266 (2) 12/31/2014 4,915 86,085 Use the above straight-line bond amortization table and prepare journal entries for the following. (a) The issuance of bonds on December 31, 2013. (b) The first interest payment on June 30, 2014. (c) The second interest payment on December 31, 2014.

Paulson Company issues 7%, four-year bonds, on December 31, 2013, with a par value of $91,000 and semiannual interest payments.
   

Semiannual Period-End			Unamortized Discount			Carrying Value
(0)	12/31/2013		$	6,553		$	84,447
(1)	6/30/2014			5,734			85,266
(2)	12/31/2014			4,915			86,085

   

Use the above straight-line bond amortization table and prepare journal entries for the following.

(a)	The issuance of bonds on December 31, 2013.
(b)	The first interest payment on June 30, 2014.
(c)	The second interest payment on December 31, 2014.

Explanation: (b)

Discount on Bonds Payable = $6,553 – $5,734 = $819

Cash = $91,000 × 7% × 1/2 = $3,185

(c)

Discount on Bonds Payable = $5,734 – $4,915 = $819

Cash = $91,000 × 7% × 1/2 = $3,185

Kohler Corporation reports the following components of stockholders’ equity on December 31, 2013: Common stock—$15 par value, 100,000 shares authorized, 55,000 shares issued and outstanding $ 825,000 Paid-in capital in excess of par value, common stock 80,000 Retained earnings 430,000 Total stockholders’ equity $ 1,335,000 In year 2014, the following transactions affected its stockholders’ equity accounts. Jan. 1 Purchased 5,500 shares of its own stock at $20 cash per share. Jan. 5 Directors declared a $4 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record. Feb. 28 Paid the dividend declared on January 5. July 6 Sold 2,063 of its treasury shares at $24 cash per share. Aug. 22 Sold 3,437 of its treasury shares at $17 cash per share. Sept. 5 Directors declared a $4 per share cash dividend payable on October 28 to the September 25 stockholders of record. Oct. 28 Paid the dividend declared on September 5. Dec. 31 Closed the $408,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Kohler Corporation reports the following components of stockholders’ equity on December 31, 2013:

Common stock—$15 par value, 100,000 shares authorized, 55,000 shares issued and    outstanding	$	825,000
Paid-in capital in excess of par value, common stock		80,000
Retained earnings		430,000
Total stockholders’ equity	$	1,335,000

In year 2014, the following transactions affected its stockholders’ equity accounts.
Jan.	1		Purchased 5,500 shares of its own stock at $20 cash per share.
Jan.	5		Directors declared a $4 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.
Feb.	28		Paid the dividend declared on January 5.
July	6		Sold 2,063 of its treasury shares at $24 cash per share.
Aug.	22		Sold 3,437 of its treasury shares at $17 cash per share.
Sept.	5		Directors declared a $4 per share cash dividend payable on October 28 to the September 25 stockholders of record.
Oct.	28		Paid the dividend declared on September 5.
Dec.	31		Closed the $408,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

1. Prepare journal entries to record each of these transactions for 2014.

Explanation:

Jan.	1		Purchased treasury stock (5,500 × $20) = $110,000.
Jan.	5		Declared $4 dividend on 49,500 outstanding shares
July	6		Cash = (2,063 × $24) = $49,512.
			Treasury Stock, Common = (2,063 × $20) = $41,260.
			Paid-In Capital, Treasury Stock = (2,063 × $4) = $8,252.
Aug.	22		Cash = (3,437 × $17) = 58,429.
			Treasury Stock, Common = (3,437 × $20) = $68,740.
Sept.	5		Declared $4 dividend on 55,000 outstanding shares = $220,000.

2.

Prepare a statement of retained earnings for the year ended December 31, 2014. (Amounts to be deducted should be indicated by a minus sign.)

 

3.

Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2014.

 

Explanation:

Common stock ($15 par value, 100,000 shares authorized, 55,000 shares issued and outstanding) = $825,000

Kinkaid Co. is incorporated at the beginning of this year and engages in a number of transactions. The following journal entries impacted its stockholders’ equity during its first year of operations. General Journal Debit Credit a. Cash 260,000 Common Stock, $25 Par Value 240,000 Paid-In Capital in Excess of Par Value, Common Stock 20,000 b. Organization Expenses 190,000 Common Stock, $25 Par Value 129,000 Paid-In Capital in Excess of Par Value, Common Stock 61,000 c. Cash 43,500 Accounts Receivable 19,000 Building 81,700 Notes Payable 59,600 Common Stock, $25 Par Value 54,600 Paid-In Capital in Excess of Par Value, Common Stock 30,000 d. Cash 125,000 Common Stock, $25 Par Value 78,000 Paid-In Capital in Excess of Par Value, Common Stock 47,000 Required: 2. How many shares of common stock are outstanding at year-end? 3. What is the amount of minimum legal capital (based on par value) at year-end? 4. What is the total paid-in capital at year-end? 5. What is the book value per share of the common stock at year-end if total paid-in capital plus retained earnings equals $796,000?

Kinkaid Co. is incorporated at the beginning of this year and engages in a number of transactions. The following journal entries impacted its stockholders’ equity during its first year of operations.

  

	General Journal	Debit	Credit
a.	Cash	260,000
	Common Stock, $25 Par Value		240,000
	Paid-In Capital in Excess of Par Value, Common Stock		20,000
b.	Organization Expenses	190,000
	Common Stock, $25 Par Value		129,000
	Paid-In Capital in Excess of Par Value, Common Stock		61,000
c.	Cash	43,500
	Accounts Receivable	19,000
	Building	81,700
	Notes Payable		59,600
	Common Stock, $25 Par Value		54,600
	Paid-In Capital in Excess of Par Value, Common Stock		30,000
d.	Cash	125,000
	Common Stock, $25 Par Value		78,000
	Paid-In Capital in Excess of Par Value, Common Stock		47,000

Required:

2.	How many shares of common stock are outstanding at year-end?

   
  

3.	What is the amount of minimum legal capital (based on par value) at year-end?

   
  

4.	What is the total paid-in capital at year-end?

   

5.

What is the book value per share of the common stock at year-end if total paid-in capital plus retained earnings equals $796,000? Explanation:  2.  Number of outstanding shares         Issued in (a) 9,600     Issued in (b) 5,160     Issued in (c) 2,184     Issued in (d) 3,120     Total 20,064           3. Minimum legal capital =  Outstanding shares × Par value per share = 20,064 × $25 = $501,600      4. Total contributed capital from common stockholders        From transaction (a) $ 260,000     From transaction (b) 190,000     From transaction (c) 84,600     From transaction (d) 125,000        Total contributed capital $ 659,600           5. Book value per common share              Total stockholders' equity (given) $ 796,000     Outstanding shares (from Part 2) 20,064        Book value per common share $ 39.67     ($796,000 / 20,064 shares)

Unilever Group reports the following equity information for the years ended December 31, 2009 and 2010 (euros in millions). December 31 2010 2009 Share capital € 486 € 486 Share premium 139 169 Other reserves (6,457 ) (3,427 ) Retained profit 15,827 15,178 Shareholders’ equity € 9,995 € 12,406 1. Match each of the three account titles share capital, share premium, and retained profit with the usual account title applied under U.S. GAAP.

Unilever Group reports the following equity information for the years ended December 31, 2009 and 2010 (euros in millions).

December 31	2010			2009
Share capital	€	486		€	486
Share premium		139			169
Other reserves		(6,457	)		(3,427	)
Retained profit		15,827			15,178
Shareholders’ equity	€	9,995		€	12,406

1.	Match each of the three account titles share capital, share premium, and retained profit with the usual account title applied under U.S. GAAP.

2. Prepare Unilever’s journal entry, using its account titles, to record the issuance of capital stock assuming that its entire par value stock was issued on December 31, 2009, for cash.   3. What were Unilever’s 2010 dividends assuming that only dividends and income impacted retained profit for 2010 and that its 2010 income totaled €2,679? (Enter answers in millions of euros and not in whole euros.)   Explanation: 3. 2010 Retained profit = 2009Retained profit + 2010 Income – 2010 Dividends € 15,827 € 15,178 € 2,679 € 2,030