FINANCIAL ACCOUNTING

AND REPORTING 2

CORPORATION

UNIVERSAL COLLEGE OF PARANAQUE INC.

PROBLEM 1:

Presented below is information related to Wyrick Company:

1. The company is granted a charter that authorizes issuance of 15,000 shares of $100 par value
preferred stock and 40,000 shares of no-par common stock.

2. 8,000 shares of common stock are issued to the founders of the corporation for land valued by the
board of directors at $300,000. The board establishes a stated value of $10 a share for the common
stock.

3. 5,000 shares of preferred stock are sold for cash at $110 per share.

4. The company issues 100 shares of common stock to its attorneys for costs associated with starting the
company. At that time, the common stock was selling at $60 per share.

Instructions Prepare the general journal entries necessary to record these transactions.

UNIVERSAL COLLEGE OF PARANAQUE INC.

UNIVERSAL COLLEGE OF PARANAQUE INC.
PROBLEM 2:

Werner Corporation has the following stockholders' equity accounts on January 1, 2008:
Common Stock, $10 par value ............................................ $1,500,000
Paid-in Capital in Excess of Par ........................................... 200,000
Retained Earnings................................................................ 500,000
Total Stockholders' Equity .............................................. $2,200,000

The company uses the cost method to account for treasury stock transactions. During 2008, the following
treasury stock transactions occurred:

April 1 Purchased 9,000 shares at $16 per share.

August 1 Sold 3,000 shares at $18 per share.
October 1 Sold 3,000 shares at $15 per share.

(a) Journalize the treasury stock transactions for 2008.

(b) Prepare the Stockholders' Equity section of the balance sheet for Werner Corporation at December 31,
2008. Assume net income was $110,000 for 2008.

UNIVERSAL COLLEGE OF PARANAQUE INC.

UNIVERSAL COLLEGE OF PARANAQUE INC.
UNIVERSAL COLLEGE OF PARANAQUE INC.
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UNIVERSAL COLLEGE OF PARANAQUE INC.

UNIVERSAL COLLEGE OF PARANAQUE INC.
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UNIVERSAL COLLEGE OF PARANAQUE INC.

UNIVERSAL COLLEGE OF PARANAQUE INC.
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UNIVERSAL COLLEGE OF PARANAQUE INC.

UNIVERSAL COLLEGE OF PARANAQUE INC.
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UNIVERSAL COLLEGE OF PARANAQUE INC.

UNIVERSAL COLLEGE OF PARANAQUE INC.
PROBLEM :

The stockholders' equity section of Lemay Corporation shows the following on December 31, 2013:

Preferred stock—6%, $100 par, 5,000 shares outstanding $ 500,000

Common stock—$10 par, 60,000 shares outstanding 600,000
Paid-in capital in excess of par 200,000
Retained earnings 118,000
Total stockholders' equity $1,418,000

Instructions Assuming that all of the company's retained earnings are to be paid out in dividends on
12/31/13 and that preferred dividends were last paid on 12/31/11, show how much the preferred and
common stockholders should receive if the preferred stock is cumulative and fully participating.

UNIVERSAL COLLEGE OF PARANAQUE INC.

UNIVERSAL COLLEGE OF PARANAQUE INC.
PROBLEM :

UNIVERSAL COLLEGE OF PARANAQUE INC.

ANY QUESTIONS

UNIVERSAL COLLEGE OF PARANAQUE INC.

UNIVERSAL COLLEGE OF PARANAQUE INC.
UNIVERSAL COLLEGE OF PARANAQUE INC.