A mining company pays $10,000,000 for a piece of land that they estimate has a r

Question

A mining company pays $10,000,000 for a piece of land that they estimate has a recoverable reserve of oil equal to 1,500,000 barrels. They estimate that they will be able to sell the land for $500,000 after they have extracted all of the oil. In year one, the company extracts 300,000 barrels of oil. They have made no prior entries for the removal of this oil. Record the journal entry to recognize the removal of this oil

A company has 800,000 shares of common stock outstanding and no preferred stock. On February 21, the board of directors declares a 25-cents-per-share dividend, payable on March 31 to shareholders of record as of March 15. Record the journal entry for the declaration of the dividend

A company has 800,000 shares of common stock outstanding and no preferred stock. On February 21, the board of directors declares a 25-cents-per-share dividend payable on March 31 to shareholders of record as of March 15. Record the journal entry for the payment of the dividend.

A corporation has 50,000 shares of $10 par common stock. A 10% stock dividend is declared and the market value of the stock is $80 immediately before the declaration. Record the journal entry made on the date the dividend is declared but not paid.

A company has 150,000 shares of common stock outstanding and 10,000 shares of $100 par value, 5% preferred stock outstanding. The company's net income was $387,500.

What are the earnings per common share? (Show your calculation.)

Explanation / Answer

1)

Depletion expense per unit of reserves

= (Cost - salvage value) / Total number of estimated barrels

= ($10000000 - $50000) / 1500000 barrels

= $6.33333 per barrel

Current year's depletion expense = 300000 barrels x $6.33333 per barrel = $1900000

Journal Entry:

Depletion expense ................................Dr. $1900000

Accumulated depletion.............................................Cr. $1900000

2)

Amount of dividend declared = $0.25/share x 800000shares = $200000

Journal Entry for declaration of dividend:

Retained earnings .........................Dr. $200000

Dividend Payable...........................................Cr. $200000

3)

Dividend Payable..........................Dr. $200000

Cash............................................................Cr. $200000

(the payment of dividend on 800000 shares @ 25 cents per share recorded)

4)

Stock dividend = 10% of 50000 shares = 5000 shares

Face value = 5000 x $10 per share = $50000

Market value = $80 per share before the declaration of dividend

Total value of stock dividend = 5000 shares x $80 per share = $400000

Journal Entry:

Retained earnings..............................................Dr. $400000

Common stock dividend distributable..................................Cr. $50000

Paid in capital in excess of par-common stock....................Cr. $350000

5)

Net earnings available to common shareholders

= $387500 - dividend to be paid to the preference shareholders

= $387500 - (10000 shares x $100 per share x 5%)

= $387500 - $50000

= $337500

Earnings per common share

= (Net earnings available to common shareholders) / Number of common shares outstanding

= $337500 / 150000

= $2.25 per common share.

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