1. Demonstration Problems Chapter 13 Stockholders' Equity © 2016 Pearson Education, Inc. 13-1

2. © 2016 Pearson Education, Inc. Future Express Inc. completed the following stock issuance transactions: Demonstration of E13-19 May 5Issued 3,000 shares of $1 par value common stock for cash of $8.00 per share. Jun. 1Issued 500 shares of $5, no-par preferred stock for $20,000 cash. Jun. 15Received equipment with a market value of $90,000 in exchange for 5,000 shares of the $1 par value common stock. Requirements 1.Journalize the transactions. Explanations are not required. 2.How much paid-in capital did these transactions generate for Future Express? 13-2

3. © 2016 Pearson Education, Inc. May 5: Issued 3,000 shares of $1 par value common stock for cash of $8.00 per share. DateAccounts and ExplanationDebitCredit May 5 Cash ($8.00 per share × 3,000 shares) 24,000 Common Stock ($1 per share × 3,000 shares) 3,000 Paid-In Capital in Excess of Par—Common 21,000 ($24,000 − $3,000) Demonstration of E13-19-Req. 1 13-3

4. © 2016 Pearson Education, Inc. Jun. 1: Issued 500 shares of $5, no-par preferred stock for $20,000 cash. DateAccounts and ExplanationDebitCredit Jun. 1 Cash 20,000 Preferred Stock 20,000 Demonstration of E13-19-Req. 1 13-4

5. © 2016 Pearson Education, Inc. Jun. 15: Received equipment with a market value of $90,000 in exchange for 5,000 shares of the $1 par value common stock. DateAccounts and ExplanationDebitCredit Jun. 15 Equipment90,000 Common Stock—$1 Par Value 5,000 ($1 per share × 5,000 shares) Paid-In Capital in Excess of Par—Common85,000 ($90,000 − $5,000) Demonstration of E13-19-Req. 1 13-5

6. © 2016 Pearson Education, Inc. Cash for Common Stock﴾$8 × 3,000 shares﴿ $24,000 Demonstration of E13-19-Req. 2 13-6

7. © 2016 Pearson Education, Inc. Cash for Common Stock﴾$8 × 3,000 shares﴿ $24,000 Cash for Preferred Stock 20,000 Demonstration of E13-19-Req. 2 13-7

8. © 2016 Pearson Education, Inc. Cash for Common Stock﴾$8 × 3,000 shares﴿ $24,000 Cash for Preferred Stock 20,000 Equipment for Common Stock 90,000 Demonstration of E13-19-Req. 2 13-8

9. © 2016 Pearson Education, Inc. Cash for Common Stock﴾$8 × 3,000 shares﴿ $24,000 Cash for Preferred Stock 20,000 Equipment for Common Stock 90,000 Total paid-in capital $134,000 Demonstration of E13-19-Req. 2 13-9

10. © 2016 Pearson Education, Inc. The stockholders’ equity of Boston Stream, Corp. on December 31, 2015, follows: Demonstration of E13-29 Stockholders’ Equity Paid-In Capital: Common Stock—$2 Par Value; 1,000 shares authorized, 400 shares issued and outstanding$800 Paid-In Capital in Excess of Par—Common1,700 Total Paid-In Capital2,500 Retained Earnings4,000 Total Stockholders’ Equity$6,500 On May 31, 2016, Boston Stream split its common stock 2-for-1. Prepare the stockholders’ equity section of the balance sheet immediately after the split. Assume the balance in retained earnings is unchanged from December 31, 2015. 13-10

11. © 2016 Pearson Education, Inc. Stockholders’ Equity Paid-In Capital: Common Stock—$1 Par Value; 1,000 shares authorized, 800 shares issued and outstanding$800 Demonstration of E13-29 13-11

12. © 2016 Pearson Education, Inc. Stockholders’ Equity Paid-In Capital: Common Stock—$1 Par Value; 1,000 shares authorized, 800 shares issued and outstanding$800 Paid-In Capital in Excess of Par—Common1,700 Demonstration of E13-29 13-12

13. © 2016 Pearson Education, Inc. Stockholders’ Equity Paid-In Capital: Common Stock—$1 Par Value; 1,000 shares authorized, 800 shares issued and outstanding$800 Paid-In Capital in Excess of Par—Common1,700 Total Paid-In Capital2,500 Demonstration of E13-29 13-13

14. © 2016 Pearson Education, Inc. Stockholders’ Equity Paid-In Capital: Common Stock—$1 Par Value; 1,000 shares authorized, 800 shares issued and outstanding$800 Paid-In Capital in Excess of Par—Common1,700 Total Paid-In Capital2,500 Retained Earnings4,000 Demonstration of E13-29 13-14

15. © 2016 Pearson Education, Inc. Stockholders’ Equity Paid-In Capital: Common Stock—$1 Par Value; 1,000 shares authorized, 800 shares issued and outstanding$800 Paid-In Capital in Excess of Par—Common1,700 Total Paid-In Capital2,500 Retained Earnings4,000 Total Stockholders’ Equity$6,500 Demonstration of E13-29 13-15

16. © 2016 Pearson Education, Inc. Magnum, Corp. earned net income of $130,000 and paid the minimum dividend to preferred stockholders for 2016. Assume that there are no changes in common shares outstanding. Magnum's books include the following figures: Demonstration of E13-33 Requirements 1.Compute Magnum's EPS for the year. 2.Assume Magnum's market price of a share of common stock is $5 per share. Compute Magnum’s price/earnings ratio. Preferred Stock—4%, $100 Par Value; 1,000 shares authorized, 600 shares issued and outstanding$60,000 Common Stock—$1 Par Value; 100,000 shares authorized, 80,000 shares issued, 75,000 shares outstanding 80,000 Paid-In Capital in Excess of Par—Common 550,000 Treasury Stock—Common; 5,000 shares at cost ﴾20,000﴿ 13-16

17. © 2016 Pearson Education, Inc. Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000. Demonstration of E13-33-Req. 1 13-17

18. © 2016 Pearson Education, Inc. Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000. Demonstration of E13-33-Req. 1 13-18

19. © 2016 Pearson Education, Inc. Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 ═ $127,600 75,000 Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000. Demonstration of E13-33-Req. 1 13-19

20. © 2016 Pearson Education, Inc. Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 ═ $127,600 75,000 ═ $1.70 per share Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000. Demonstration of E13-33-Req. 1 13-20

21. © 2016 Pearson Education, Inc. Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 ═ $127,600 75,000 ═ $1.70 per share Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000. Price/earnings ratio ═ Market price per share of common stock Earnings per share Demonstration of E13-33-Req. 2 13-21

22. Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 ═ $127,600 75,000 ═ $1.70 per share Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000. Price/earnings ratio ═ Market price per share of common stock Earnings per share ═$5 $1.70 Demonstration of E13-33-Req. 2

23. Earnings per share ═ Net income − Preferred dividends Average number of common shares outstanding ═ $130,000 − $2,400 75,000 ═ $127,600 75,000 ═ $1.70 per share Net income$130,000 Preferred dividends ﴾600 shares × $100 × 4%﴿$2,400 Market price per share of common stock$5 Average number of common shares outstanding75,000. Price/earnings ratio ═ Market price per share of common stock Earnings per share ═$5 $1.70 ═ $2.94 per share Demonstration of E13-33-Req. 2

24. End of Chapter 13 © 2016 Pearson Education, Inc. 13-24