Chapter 12 Special Income and Investment Reporting Issues 569Paid-in capital from sale of Treasury stock $ 5,000
Paid-in capital in excess of par—common stock 996,300
Paid-in capital in excess of par—preferred stock 240,000
Patents 85,000
Preferred 6–^23 % stock, $100 par (30,000 shares authorized; 15,000 shares issued) 1,500,000
Prepaid expenses 15,900
Retained earnings, August 1, 2005 4,231,600
Temporary investments in marketable equity securities (at cost) 95,000
Treasury stock (1,000 shares of common stock at cost of $40 per share) 40,000
Unrealized gain (net of tax) on marketable equity securities 15,000Income statement data:
Administrative expenses $ 140,000
Cost of merchandise sold 984,000
Gain on condemnation of land 30,000
Income tax:
Applicable to continuing operations 170,000
Applicable to loss from discontinued operations 24,000
Applicable to gain on condemnation of land 10,000
Interest expense 7,500
Interest revenue 1,500
Loss from disposal of discontinued operations 104,000
Loss from fixed asset impairment 60,000
Restructuring charge 300,000
Sales 2,600,000
Selling expenses 540,000Instructions
- Prepare a multiple-step income statement for the year ended July 31, 2006, concluding with
earnings per share. In computing earnings per share, assume that the average number of
common shares outstanding was 250,000 and preferred dividends were $100,000. Assume
that the gain on the condemnation of land is an extraordinary item. - Prepare a retained earnings statement for the year ended July 31, 2006.
- Prepare a balance sheet in report form as of July 31, 2006.
Theater Arts Company produces and sells theater costumes. The following transactions relate
to certain securities acquired by Theater Arts Company, which has a fiscal year ending on
December 31:2006
Feb. 10 Purchased 4,000 shares of the 150,000 outstanding common shares of Haslam
Corporation at 48 per share plus commission and other costs of $168.
June 15 Received the regular cash dividend of $0.70 a share on Haslam Corporation stock.
Dec. 15 Received the regular cash dividend of $0.70 a share plus an extra dividend of $0.05 a
share on Haslam Corporation stock.(Assume that all intervening transactions have been recorded properly and that the
number of shares of stock owned have not changed from December 31, 2006, to
December 31, 2009.)
2010
Jan. 3 Purchased an influential interest in Jacob, Inc. for $1,250,000 by purchasing 40,000 shares
directly from the estate of the founder of Jacob. There are 100,000 shares of Jacob, Inc.
stock outstanding.
Apr. 1 Received the regular cash dividend of $0.70 a share and a 2% stock dividend on the
Haslam Corporation stock.
July 20 Sold 1,000 shares of Haslam Corporation stock at 41. The broker deducted commission
and other costs of $50, remitting the balance.
Dec. 15 Received a cash dividend at the new rate of $0.80 a share on the Haslam Corporation stock.Problem 12-3A
Entries for investments
in stock
Goal 3
GENERAL LEDGER
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