[fustrated]

1.The following transactions relate to the stockholders' equity transactions of Lindsay Corporation for its initial year of existence.

(a) Jan. 7 Articles of incorporation are filed with the state. The state authorized the issuance of 10,000 shares of $50 par value preferred stock and 200,000 shares of $10 par value common stock.
(b) Jan. 28 40,000 shares of common stock are issued for $14 per share.
(c) Feb. 3 80,000 shares of common stock are issued in exchange for land and buildings that have an appraised value of $250,000 and $1,000,000, respectively. The stock traded at $15 per share on that date on the over-the-counter market.
(d) Feb. 24 2,000 shares of common stock are issued to Shane and Winston, Attorneys-at-Law, in payment for legal services rendered in connection with incorporation. The company charged the amount to organization costs. The market value of the stock was $16 per share.
(e) Sep. 12 Received subscriptions for 10,000 shares of preferred stock at $53 per share. A 40 percent down payment accompanied the subscriptions. The balance is due on October 1.
(f) Oct. 1 Received the final payment for 10,000 shares of preferred stock.
Prepare journal entries to record the foregoing transactions. Identify the entries by letter (a - f).

a.) Memorandum Entry: Received authorization to issue 10,000 shares of $50 par value preferred stock and 200,000 shares of $10 par value common stock today January 7.

b.) Jan 28
Cash 560,000
Common Stock 400,000
Paid-in-capital in excess of par 160,000

c.) Feb. 3
Land 250,000
Building 1,000,000
Common stock 800,000
Paid-in Capital in Excess of Par 450,000

d.) Feb. 24
Organization Service Expense 32,000
Common Stock 32,000
Pg 757


e.) Sept. 12
Preferred Stock Subscriptions Receivable 530,000
Preferred Stock Subscribed 500,000
Paid-in Capital in Excess of Par 30,000
Cash 212,000
Preferred Stock Subscriptions Receivable 212,000

f.) Cash 318,000
Preferred Stock Subscriptions Receivable 318,000

Preferred stock Subscribed 500,000
Preferred stock 500,000

2. On August 10, Jameson Corporation reacquired 8,000 shares of its $100 par value common stock at $134. The stock was originally issued at $110. The shares were resold on November 21 at $145.

Provide the entries required to record the reacquisition and the subsequent resale of the stock using the:

(1) Par value method of accounting for treasury stock.
(2) Cost method of accounting for treasury stock.

1.)
Aug. 10
Treasury Stock (8,000 shares x $100 par) 800,000
Paid-in Capital in Excess of Par 80,000
Retained Earnings ($1,072,000 - $880,000) 192,000
Cash 1,072,000


Nov. 21
Cash 1,160,000
Treasury Stock 8,000
Paid-in Capital in Excess of Par 1,152,000

2.)
Aug. 10
Treasury Stock 1,072,000
Cash 1,072,000
$1,072,000/8,000 shares = $134

Nov 21
Cash 1,160,000
Treasury Stock (8,000 shares x $134) 1,072,000
Paid-in Capital from Treasury Stock 88,000

3. In 2008, KZF Inc. purchased stock as follows:

(a) Acquired 2,000 shares of Gallery Arts Corp. common stock (par value $20) in exchange for 1,200 shares of KZF Inc. preferred stock (par value $30). The preferred stock had a market value of $75 per share on the date of the exchange.
(b) Purchased 800 shares of Champion Corp. common stock (par value $10) at $70 per share, plus a brokerage fee of $800.

At December 31, 2008, the market values of the securities were as follows:

Security Market Value
KZF Inc.. . $71
Gallery Arts Corp.. . 41
Champion Corp.. . 72

The investments in common stock are classified by KZF Inc. as available-for-sale securities accounted for by the cost method. The fiscal year of KZF ends on December 31.

(1) Prepare all entries relating to the investments in common stock for 2008.


(2) Prepare the entry to record the sale of 200 shares of Champion Corp. common stock on January 15, 2009, at $74 per share.
(3) Prepare the entry to reclassify the remaining 600 shares of Champion Corp. common stock from available-for-sale securities to trading securities on January 31, 2009. The stock was selling at $67 per share on that date.

1.) a.) Common Stock, $20 par 40,000
Paid-in Capital in Excess of Par-Preferred 50,000
Preferred Stock, $30 par 36,000
Paid-In Capital in Excess of Par-Common 54,000

b.) Investment in available-for-sale Securities 56,800
Cash 56,800

2.) Cash (200 shares x $74) 14,800
Investment in available-for-sale securities 14,200*
Realized Gain on Sale of Securities 600

3.) Investment in Trading Securities (600 x $72) 43,200
Market Adjustment-Available-for-sale Securities 3,000
Unrealized Loss on Transfer of Securities 1,200
Unrealized Increase/Decrease in Value of Available-for-sale Securities 3,000
Investment in Available-for-Sale Securities 44,400

4. Webster Inc. carries the following marketable equity securities on its books at December 31, 2007, and 2008. All securities were purchased during 2007 and there were no beginning balances in any market adjustment accounts.

Trading Securities:
Market Market
Cost December 31, 2007 December 31, 2008
V Company $ 50,000 $ 26,000 $ 40,000
W Company 26,000 40,000 40,000
X Company 70,000 60,000 50,000
Total $146,000 $126,000 $130,000

Available-for-Sale Securities:

Y Company $420,000 $360,000 $200,000
Z Company 100,000 120,000 240,000
Total $520,000 $480,000 $440,000

The cost method is used in accounting for all investments in securities.

(1) Give the entries necessary to record the valuations for both trading and available-for-sale securities at December 31, 2007 and 2008.
(2) What net effect would these valuations have on 2007 and 2008 net income?


5.On January 1, 2008, Alsop Corp. acquired 30 percent (13,000 shares) of Stone Services Inc. common stock for $1,300,000 as a long-term investment. Data from Stone's 2008 financial statements include the following:

Net income... $330,000
Less cash dividends paid... 160,000
Increase in retained earnings... $170,000

The market value of Stone Services Inc. common stock on December 31, 2008, was $98 per share. Alsop does not have any other noncurrent investments in securities.

Prepare the necessary journal entries for Alsop's investment in Stone Services Inc. common stock under

(1) the cost method classified as available-for-sale securities.
(2) the equity method.

Jan 1, 2008
Investment in Available-for-Sale Securities 1,300,000
Cash 1,300,000
(13,000 x $100 per share)
Dec 31
Market Adjustment-Available-for-Sale Securities 26,000
Unrealized Increase/Decrease in value of Available-
For-Sale Securities 26,000

2.)
Jan 1, 2008
Investment in Stone Services Inc. Stock 1,300,000
Cash 1,300,000

Investment in Stone Services Inc. Stock 99,000
Income from investment in Stone Services Inc. Stock 99,000*
*(330,000 x 30%)
To record the purchase of 30% of Stone Services Inc. Common Stock

Cash 48,000
Investment in Stone Services Inc. 48,000
To record the receipt of dividends


6. On July 1, 2005, Hawkeye Aviation leased two helicopters from Honnicutt Aircraft for an initial period of 12 months with a provision for a continuation on a month-to-month basis. The lease is properly classified as an operating lease. Lease payments are to be made as follows:

First two months... $15,000 per month
Second three months... 12,000 per month
Third three months... 10,000 per month
Last four months... 8,000 per month

After the first year, the rent continues at $6,000 per month. Provide the entries required to record the lease payments for the first year on the books of

(1) Hawkeye Aviation.
(2) Honnicutt Aircraft.

1.) Hawkeye Aviation Lessee

Month 1
Rent Expense 10,667
Rent Payable 4,333
Cash 15,000

Month 2
Rent Expense 10,667
Rent Payable 4,333
Cash 15,000

Month 3
Rent Expense 10,667
Rent Payable 1,333
Cash 12,000

Month 4
Rent Expense 10,667
Rent Payable 1,333
Cash 12,000

Month 5
Rent Expense 10,667
Rent Payable 1,333
Cash 12,000

Month 6
Rent Expense 10,667
Rent Payable 667
Cash 10,000

Month 7
Rent Expense 10,667
Rent Payable 667
Cash 10,000

Month 8
Rent Expense 10,667
Rent Payable 667
Cash 10,000

Month 9
Rent Expense 10,667
Rent Payable 2,677
Cash 8,000

Month 10
Rent Expense 10,667
Rent Payable 2,677
Cash 8,000

Month 11
Rent Expense 10,667
Rent Payable 2,677
Cash 8,000

Month 12
Rent Expense 10,667
Rent Payable 2,677
Cash 8,000

2.) Honnicutt Aircraft- Lessor

Month 1
Cash 15,000
Rent Revenue 15,000

Month 2
Cash 15,000
Rent Revenue 15,000

Month 3
Cash 12,000
Rent Revenue 12,000

Month 4
Cash 12,000
Rent Revenue 12,000

Month 5
Cash 12,000
Rent Revenue 12,000

Month 6
Cash 10,000
Rent Revenue 10,000


Month 7
Cash 10,000
Rent Revenue 10,000

Month 8
Cash 10,000
Rent Revenue 10,000

Month 9
Cash 8,000
Rent Revenue 8,000

Month 10
Cash 8,000
Rent Revenue 8,000

Month 11
Cash 8,000
Rent Revenue 8,000

Month 12
Cash 8,000
Rent Revenue 8,000

Assume fiscal year June to July.

This is what I come up with, please check them over and let me know if I have not done them correctly and how to do them.
Thanks

[morgaine300]

I started to look this and quite honestly, freaked when I saw you'd put SO much into one post!! I'm sorry, but this is just too mcuh to deal with all at once. I spent quite a bit of time just going through the initial stock issuance entries, just to look at the rest of the thread and realize you'd posted a whole crapload of stuff all at once.

I only looked through the initial stock issuance part and have ignored the rest. It took me quite some time just to do this one part.

Also, please always put Dr and Cr in front of your entries, since in this format we really have no way of knowing which are which, other than to assume you've listed debits first and that you're correct. (And personally, I don't like assuming anything.)

(a) and (b) are fine. As for (c) that's a bit "iffy." Technically, you should be going by whichever is more reasonably determinable in terms of market value. I did some checking in a textbook and it says if the market value of the stock can be determine that that is what you are supposed to use. That comes out to a difference of $50,000, which would then have to be pro-rated off the values of the land and the building. I will grant you two things here. One, that I've always worked for small companies (mostly partnerships and S corporations) and never in "real work" have ever gotten into entries like this. That means basically that this is all "textbook" work to me. And second, things can change and my old textbooks are years old. It's possible they've changed the rules. However, the book I'm using states clearly that if the market value of the stock can be determine, that is what should be used. But you should check on this in your own textbook to be sure.

As for (d) -- stock should always be listed at the par value, which is $10. You should not be listing the common stock account at $32,000 because that is not par value. It needs split between par at $10 per share for the Common Stock account, and the $6 per share that is in excess of the par.

(e) -- It appears that this is correct. Not only is it helpful if you list Dr and Cr before each line of the entry, it also helps if you separate the entries. Being done on the same date doesn't make it one entry. But it appears to be correct. And so does (f).

And that's where I stopped. Can you please separate these into separate posts.