The Dent Company’s Contributed Capital section of January 1, 2010, balance sheet is a follows:
Preferred stock (6%, $50 par, 8,000 shares authorized,
3,400 shares issued and outstanding) $170,000
Common stock ($10 par, 30,000 shares authorized,
12,000 shares issued and outstanding) 120,000
Additional paid-in capital on preferred stock 12,800
Additional paid-in-capital on common stock 72,000
During 2010, the company entered into the following transactions:
Jan. 3 established a compensatory share option plan for its key executives. The options vest after a three year service period. The estimated fair value of the options expected to be exercised is $81,000.
Apr. 24 Sold 300 shares of preferred stock at $55 per share.
June 3 Sold 600 shares of common stock at $17 per share.
Sept. 30 Purchased building by paying $9,000 cash and issuing 800 shares of common stock and 450 shares of preferred stock. Common and preferred stock are currently selling for $19 and $57 per share, respectively.
Oct. 31 Reacquired 900 shares of common stock at $19.50 per share. The company uses the cost method to account for treasury stock.
Nov. 30 issued for $32,000 a combination of 700 shares of common stock and 12% bonds with a face value of $20,000. The common stock is currently selling for $18 per share. No market value exists for the bonds.
Dec. 1 reissued the 900 shares of treasury stock at $20.50 per share
Dec. 28 Distributed a $3.00 per share dividend to all outstanding preferred stock and a $1.50 per share dividend to all common stock outstanding on this date (debit Retained Earnings and credit Cash for each dividend.)
Dec. 31 declared a two-for-one stock split on the common stock and increased the authorized shares to 60,000.
1. Prepare journal entries to record the preceding transactions.
2. Prepare the contributed capital section of Dent’s December 31, 2010.
3. Calculate the weighted average shares outstanding as of December 31, 2010, that would be used to calculate earnings per share.
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