Reference no: EM131775704
Question 1 - Issuing stock and preparing the stockholder's equity section of the balance sheet
Lockridge Inc was organized in 2009. At December 31, 2009 the company sheet reported the stockholder's equity.
Paid in capital:
Preferred stock, 5%, $45 par, 140,000 shares authorized, none issued $0
Common stock, $2 par, 525,000 shares authorized, 62,000 shares issued and outstanding 124,000
Paid in capital in excess of par-common 42,000
Total paid in capital $166,000
Retained earnings 28,000
Total stockholders equity $194,000
Requirements:
1. During 2010, the company completed the following selected transactions. Journalize each transaction. Explanations are not required.
a. Issued for cash 1,400 shares of preferred stock at par value
b. Issued for cash 2,300 shares of common stock at a price of $3 per share
c. Net income for the year was $79,000 and the company declared no dividends. Make the closing entry for net income.
2. Prepare the stockholders equity section of the Lockridge company balance sheet at December 31, 2010.
Question 2 - Computing dividends on preferred and common stock
Hip Skincare has 5,000 shares of 5%, $15 par value preferred stock and 80,000 shares of $2.25 par common stock outstanding. During a three year period, hip declared and paid cash dividends as follows:2010, $2,000. 2011,$15,000 and 2012 $20,000
Requirements
1. Compute the total dividends to preferred and to common for each of the three years if.
a. Preferred is noncumulative
b. Preferred cumulative
2. For requirement 1.b. journalize the declaration of the 2011 dividends on December 22, 2011 and payment on January 14, 2012. Use separate dividends
Question 3 - Computing and recording a corporations income tax
The accounting records of Restore Redwood Corporation provide income statement data for 2011
Total revue $910,000
Total expenses 700,000
Income before tax $210,000
Total expenses include depreciation of $56,000 computed on the straight line method. In calculating taxable on the tax return, Restore Redwood uses the modified accelerated cost recovery system (MACRS). MACRS depreciation was $81,000 for 2011. The corporate income tax rate is 40%
Requirements:
1. Compute taxable income for the year. For this computation, substitute MACRS depreciation in place of straightline depreciation.
2. Journalize the corporations income tax for 2011
3. Show how to report the two income tax liabilities on Restore's classified balance sheet