Problems & Solutions Chapter 12

1. The corporate chapter of Sokol Corporation allows the issuance of a maximum of 1,00,000
shares of common stock. During its first 2 years of operations, Sokol sold 80,000 shares to
stockholders and reacquired 7000 of these shares. After these transactions, how many shares
are authorized, issued and outstanding?
2. Land appraised at $80,000 is purchased by issuing 1,000 shares of $20 par value common stock.
The market price of the shares at the time of the exchange, based on active trading in the
securities market, is $90 per share. Should the land be recorded at $20,000, $80,000 or
$90,000? Explain.
3. On May 10, Romano Corporation issues 1000 shares of $10 par value common stock for cash at
$18 per share. Journalize the issuance of the stock.
4. On June 1, Herrera Inc. issues 3000 shares of no par common stock at a cash price of $7 per
share. Journalize the issuance of the shares assuming the stock has a stated value of $1 per
share.
5. Tara Inc.’s $10 par value common stock is actively traded at a market value of $16 per share.
Tara issues 5,000 shares to purchase land advertised for sale at $85,000. Journalize the issuance
of the stock in acquiring the land.
6. On July 1,Fritz Corporation purchases 500 shares of its $5 par value common stock for the
treasury at a cash price of $9 per share. On September 1, it sells 300 shares of the treasury stock
for cash at $11 per share. Journalize the two treasury stock transactions.
7. Ervay Inc. issues 5000 shares of $100 par value preferred stock for cash at $120 per share.
Journalize the issuance of the preferred stock.
8. Chavez Corporation has 50,000 shares of common stock outstanding. It declares a $1 per share
cash dividend on November 1 to stockholders of record on December 1. The dividend is paid on
December 31. Prepare the entries on the appropriate dates to record the declaration and
payment of the cash dividend.
9. Walters Corporation has 60,000 shares of $10 par value common stock outstanding. It declares a
10% stock dividend on December 1. When the market value per share is $16. The dividend
shares are issued on December 31. Prepare the entries for the declaration and payment of the
stock dividend.
10. For the year ending December 31, 2006, Mount Inc. reports net income $120,000 and dividends
$85,000. Prepare the retained earnings statement for the year assuming the balance in retained
earnings on January 1, 2006, was $220,000.
11. The balance sheet for Jimenez Inc. shows the following total paid in capital and retained
earnings $870,000, total stockholders’ equity $810,000, common stock issued 44000 shares, and
common stock outstanding 40,000 shares. Compute the book value per share.