tte well-formatted your answer is than whether or not the answer is correct. I w

Question

tte well-formatted your answer is than whether or not the answer is correct. I will award extra points for well-written and correctly formatted statements presented with attention to detail even if your answers are wrong. I will remove points if your answer sheet is messy, disorganized, and the numbers are not properly written below each other in your statements even if your answers are correct. (2 points) Write down your exam seat number (available on your grades section on elearning) next to your name on your answer sheet. Question 1 (10 points) Inland Corporation issued 50,000 shares of S3 par value common stock at $21 per share and 9,000 shares of S30 par value, ten percent preferred stock at $85 per share. Later, the company purchased 2,000 shares of its own common stock at $23 per share Required a. Prepare the journal entries to record the share issuances and the purchase of the common shares. b. Assume that Inland sold 1,500 shares of the treasury stock at $28 per share. Prepare the general journal entry to record the sale of this treasury stock. c. Assume that Inland sold the remaining 500 shares of treasury stock at $20 per share. Prepare the journal entry to record the sale of this treasury stock. Question 2 (8 points) The Waterford Company had 50,000,000 shares of S0.10 par value common stock outstanding which had been sold for an aggregate amount of $500,000,000. The company's shares are traded on the New York Stock Exchange, which has a minimum listing price of S1 per share. Recently the company's common stock has been trading on the exchange below $1 per share, and the exchange has notified the company that its common stock would be delisted in 30 days if the stock price did not rebound above its minimum listing price. In response to this notification, Waterford authorized a 1-for-40 reverse stock split. Following the reverse stock split: Required a. How many common shares will be outstanding? b. What will be the new par value per share? c. How will the reverse stock split be recorded in the company's accounts?

Explanation / Answer

Q2)

a) Number of common shares that will be outstanding after the reverse stock split = 50,000,000 / 40 = 1250000

b) New par value of the share = $0.10 x 40 = $4

c) There will be no journal needed for recording a reverse stock split as before and after the reverse stock split the paid in capital will remain the same. However a memorandum entry could be pased to record that the number of shares of common stock has been changed from 50000000 to 1250000 with a change is the par value of the sahre from $0.10 to $4 per share of common stock

Q3)

Return on Common Stock holder's Equity

For 2015:

(net income - preferred dividend) / Common stockholders' equity = ($125000 - $15000) / $4000000 = 2.75%

For 2016:

(net income - preferred dividend) / Common stockholders' equity = ($150000 - $18000) / $4200000 = 3.14%

b)

Dividend Yield for 2015:

Dividend per share of common stock / market price per share of common stock = $2.80 / $58 = 4.83%

Dividend Yield for 2016:

Dividend per share of common stock / market price per share of common stock = $3.20 / $59.50 = 5.38%

c)

Dividend payout for 2015:

Dividend per share of common stock / earning per share = $2.80/$5.80 = 48.28%

Dividend payout for 2016:

Dividend per share of common stock / earning per share = $3.20/$6.00 = 53.33%

Q. 1) Account Title & Explanations debit ($) Credit ($) a) Cash 1815000 Paid in capital in excess of par - common stock 900000 paid in capital in excess of par - preferred stock 495000 common stock 150000 preferred stock 270000 (issue of common stock and preferred stock) Treasury stock - at cost 46000 Cash 46000 b) Cash 42000 Treasury Stock - at cost 34500 Additional paid in capital 7500 (sale of treasury stock) c) Cash 10000 Additional paid in Capital 1500 Treasury Stock - at cost 11500 (sale of 500 treasury stock)

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