ACC423 Team Week 2 P15-1 P16-6 P16-7 CA16-4

Price: $7.99


Resource: Intermediate Accounting
Prepare written responses to the following assignments from the text:

• Ch. 15: Problem P15-1
• Ch. 16: Problems P16-6 & P16-7 and Concepts for Analysis CA16-4

P15-1 (Equity Transactions and Statement Preparation) On January 5, 2007, Drabek Corporation received a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $5 par value common stock. It then completed these transactions.

Jan. 11 Issued 20,000 shares of common stock at $16 per share.

Feb. 1 Issued to Robb Nen Corp. 4,000 shares of preferred stock for the following assets: machinery with a fair market value of $50,000; a factory building with a fair market value of $110,000; and land with an appraised value of $270,000.

July 29 Purchased 1,800 shares of common stock at $19 per share. (Use cost method.)

Aug. 10 Sold the 1,800 treasury shares at $14 per share.

Dec. 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend.

Dec. 31 Closed the Income Summary account. There was a $175,700 net income.

Instructions

(a) Record the journal entries for the transactions listed above.

(b) Prepare the stockholders’ equity section of Drabek Corporation’s balance sheet as of December
31, 2007.

P16-6 (EPS Computation of Basic and Diluted EPS) Edmund Halvor of the controller’s office of East
Aurora Corporation was given the assignment of determining the basic and diluted earnings per share
values for the year ending December 31, 2007. Halvor has compiled the information listed below.

1. The company is authorized to issue 8,000,000 shares of $10 par value common stock. As of
December 31, 2006, 3,000,000 shares had been issued and were outstanding.

2. The per share market prices of the common stock on selected dates were as follows.
Price per Share
July 1, 2006 $20.00
January 1, 2007 21.00
April 1, 2007 25.00
July 1, 2007 11.00
August 1, 2007 10.50
November 1, 2007 9.00
December 31, 2007 10.00

and so on

P16-7 (Computation of Basic and Diluted EPS) The information below pertains to Prancer Company
for 2007.

Net income for the year $1,200,000
8% convertible bonds issued at par ($1,000 per bond). Each bond is convertible into
40 shares of common stock. 2,000,000
6% convertible, cumulative preferred stock, $100 par value. Each share is convertible
into 3 shares of common stock. 3,000,000
Common stock, $10 par value 6,000,000
Common stock options (granted in a prior year) to purchase 50,000 shares of common
stock at $20 per share 500,000
Tax rate for 2004 40%
Average market price of common stock $25 per share
There were no changes during 2007 in the number of common shares, preferred shares, or convertible
bonds outstanding. There is no treasury stock.

Instructions

(a) Compute basic earnings per share for 2007.

(b) Compute diluted earnings per share for 2007.

CA16-4 (Stock Compensation Plans) The following two items appeared on the Internet concerning
the passage of SFAS No. 123(R).

WASHINGTON, D.C.—February 17, 2005 Congressman David Dreier (R–CA), Chairman of the House Rules
Committee, and Congresswoman Anna Eshoo (D–CA) reintroduced legislation today that will preserve
broad-based employee stock option plans and give investors critical information they need to
understand how employee stock options impact the value of their shares.

and so on