Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 11, Problem 1CC
CC11 Accounting for Equity Financing
Nicole has been financing Nicole's Getaway Spa (NGS) using equity financing. Currently NGS has authorized 100,000 no-par
Recently the following transactions have taken place.
- a. NGS issues 1,000 preferred shares for $12 a share.
- b. NGS repurchases 1,000 common shares for $11 a share.
- c. On November 12, the board of directors declares a $0.10 cash dividend on each outstanding preferred share.
- d. The dividend is paid December 20.
Required:
- 1. Prepare the
journal entries needed for each of the transactions. - 2. If you were a common shareholder concerned about your voting rights, would you prefer Nicole to issue additional common shares or additional preferred shares? Why?
- 3. Describe the overall effect of each transaction on the assets, liabilities, and shareholders’ equity of the company. (Use + for increase, − for decrease, and NE for no effect.)
- 4. How would each transaction affect the ROE ratio?
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Nicole has been financing Nicole's Getaway Spa (NGS) using equity financing. Currently NGS has authorized 100,000 no-
par preferred shares and 200,000 $2 par common shares. Outstanding shares include 57,000 preferred shares and
47,000 common shares.
Recently the following transactions have taken place.
a. NGS Issues 1,350 preferred shares for $11 a share.
b. NGS repurchases 1,350 common shares for $10 a share.
c. On November 12, the board of directors declares a $0.30 cash dividend on each outstanding preferred share.
d. The dividend is paid December 20.
4. How would each transaction affect the ROE ratio? (Use + for Increase, - for decrease, and NE for no effect.)
Transaction
a.
b.
C.
d.
ROE
Case study 3: Victory SAOG is registered with an authorized capital of OMR 50 million ordinary shares of 100 baiza each. The company had issued and paid up capital of OMR 33 million. In the year 2017 Victory SAOG has an outlined share repurchase program which would enable the company to repurchase at least 10 per cent of its outstanding shares. The company had an opening balance of OMR 55 million in its retained earnings account. After completing the required formalities for such repurchase in the vear 2017, the company was able to repurchase the 19.8 million shares valued at OMR 31,680,000 in the month of August. Later in the year 2019 the company was able to repurchase another 10 million shares for OMR 15 million in July.
The following are the profits earned by the company over the period of 2017 to 2019: OMR in Millions'
2017: 110
2018: 150
2019: 160
The company decided to distribute dividends as mentioned below:
#Interim dividend:
2017: Nil
2018:5%
2019:Nil
#Final dividend:…
B. Abu Dhabi Corporation is authorized to issue 1,000,000 shares of $1 par value common stock.
During 2008, the company has the following stock transactions.
Sept. 5 Purchased 10,000 shares of common stock for the treasury at $9 per share.
Instructions
Journalize the transactions for Abu Dhabi Corporation.
Date
Account title
Debit
Credit
Chapter 11 Solutions
Fundamentals Of Financial Accounting
Ch. 11 - Prob. 1QCh. 11 - Prob. 2QCh. 11 - Prob. 3QCh. 11 - Explain each of the following terms: (a)...Ch. 11 - What are the differences between common stock and...Ch. 11 - What is the distinction between par value and...Ch. 11 - What are the usual characteristics of preferred...Ch. 11 - What items are included in Accumulated Other...Ch. 11 - What is treasury stock? Why do corporations...Ch. 11 - How is treasury stock reported on the balance...
Ch. 11 - What are the two financial requirements to support...Ch. 11 - What is the difference between cumulative and...Ch. 11 - What is a stock dividend? How does a stock...Ch. 11 - What are the primary reasons for issuing a stock...Ch. 11 - Your company has been very profitable and expects...Ch. 11 - Identify and explain four important dates with...Ch. 11 - Prob. 17QCh. 11 - How do stock repurchases affect the EPS and ROE...Ch. 11 - What is one interpretation of a high P/E ratio?Ch. 11 - Prob. 20QCh. 11 - Which feature is not applicable to common stock...Ch. 11 - Which statement regarding treasury stock is false?...Ch. 11 - Which of the following statements about stock...Ch. 11 - Which of the following is ordered from the largest...Ch. 11 - Prob. 5MCCh. 11 - A journal entry is not recorded on what date? a....Ch. 11 - Prob. 7MCCh. 11 - Prob. 8MCCh. 11 - Prob. 9MCCh. 11 - Prob. 10MCCh. 11 - Equity versus Debt Financing Indicate whether each...Ch. 11 - Computing the Number of Issued Shares Face 2 Face...Ch. 11 - Computing the Number of Unissued Shares The...Ch. 11 - Analyzing and Recording the Issuance of Common...Ch. 11 - Analyzing and Recording the Issuance of No-Par...Ch. 11 - Determining the Effects of Stock Issuance and...Ch. 11 - Determining the Amount of a Dividend Netpass...Ch. 11 - Recording Dividends On May 20, the board of...Ch. 11 - Determining the Impact of a Stock Dividend Sturdy...Ch. 11 - Determining the Impact of a Stock Split Complete...Ch. 11 - Determining the Amount of a Preferred Dividend...Ch. 11 - Determining the Amount of a Preferred Dividend...Ch. 11 - Calculating and Interpreting Earnings per Share...Ch. 11 - Inferring Financial Information Using the P/E...Ch. 11 - (Supplement 11A) Comparing Owner's Equity to...Ch. 11 - (Supplement 11B) Recording a Stock Dividend To...Ch. 11 - Computing Shares Outstanding The 2016 annual...Ch. 11 - Reporting Stockholders' Equity and Determining...Ch. 11 - Preparing the Stockholders' Equity Section of the...Ch. 11 - Reporting the Stockholders' Equity Section of the...Ch. 11 - Determining the Effects of the Issuance of Common...Ch. 11 - Recording and Reporting Stockholders' Equity...Ch. 11 - Finding Amounts Missing from the Stockholders'...Ch. 11 - Recording Treasury Stock Transactions and...Ch. 11 - Prob. 9ECh. 11 - Computing Dividends on Preferred Stock and...Ch. 11 - Recording Dividends and Preparing a Statement of...Ch. 11 - Analyzing Stock Dividends On December 31, the...Ch. 11 - Prob. 13ECh. 11 - Comparing 100 percent Stock Dividend and 2-for-1...Ch. 11 - Journalizing Cash Dividends Bogscraft Company has...Ch. 11 - Preparing a Statement of Retained Earnings and...Ch. 11 - Determining the Effect of a Stock Repurchase on...Ch. 11 - (Supplement 11 A) Comparing Stockholders' Equity...Ch. 11 - Prob. 19ECh. 11 - Analyzing Accounting Equation Effects, Recording...Ch. 11 - Recording Stock Dividends Activision Blizzard,...Ch. 11 - Finding Missing Amounts At December 31, the...Ch. 11 - Prob. 4CPCh. 11 - Prob. 5CPCh. 11 - Analyzing Accounting Equation Effects, Recording...Ch. 11 - Recording Cash Dividends National Chocolate Corp....Ch. 11 - Finding Missing Amounts At December 31, the...Ch. 11 - Calculating Common and Preferred Cash Dividends...Ch. 11 - Prob. 5PACh. 11 - Analyzing Accounting Equation Effects, Recording...Ch. 11 - Prob. 2PBCh. 11 - Prob. 3PBCh. 11 - Prob. 4PBCh. 11 - Prob. 5PBCh. 11 - Financial Reporting of Depreciation, Write-off,...Ch. 11 - Prob. 2COPCh. 11 - Prob. 1SDCCh. 11 - Prob. 2SDCCh. 11 - Prob. 4SDCCh. 11 - Prob. 5SDCCh. 11 - Critical Thinking: Making a Decision asan Investor...Ch. 11 - CC11 Accounting for Equity Financing Nicole has...
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