PROBLEM 11 (10%) The following data was taken from the income statement and hala

Question

PROBLEM 11 (10%) The following data was taken from the income statement and halance sheet at the end of the current year of Kaczynski Corp. The net income was $900,00 Building Accumulated Depreciation Bldg Cash Marketable Securities Account Receivables Allowance for Uncollectible Accts. Merchandise Inventory Supplies Prepaid Insurance Accounts Payable Accrued Liabilities Mortgage Payable Common Stock, $3 Par Value Paid-In Capital in Excess of Par, Common Retained Earnings $ 1,000,000 125,000 245,000 124,000 4,000 105,000 2,000 3,000 100,000 20,000 18,000 225,000 REQUIRED Determine the following 1. Current Ratio 2. Quick Ratio 3. Earnings per Share PROBLEM 111 (20%) The following transactions took place in 2018for Dahmer Corp Issued 20,000 shares of S1 par value common stock for $50,000, Declared dividend of $4 per share on the outstanding shares of common stock to shareholders of record as of March 25. Assume that there were 50,000 shares of outstanding stock as of March 15. Mar.15 Apr. 1 Paid dividends declared March 15 July1 Reacquired 10,000 shares of its own stock at $13 Sept. 1 Declared and issued a 10% stock dividend on the outstanding common stock. The fair market value of a common share of Dahmer Corp. was $16 REOIRED, Pepurethne daes

Explanation / Answer

Problem II:

1. Current Ratio = Current Assets / Current Liabilities

= 662000/126000

= 5.25 :1

Calculation of current assets

Calculation of Current liabilities

2. Quick ratio = ( Current assets - Inventories) / Current Liabilities

= ( 662000-105000)/126000

= 4.42 : 1

3. Earning per share = Net income / Number of shares

= $ 900000/100000

= $ 9.

calculation of number of shares = Total Common stock value / value per stock

= $ 300000 / $ 3

= 100,000 shares.

Problem III

Journal Entries

1. Bank a/c... Dr $ 50000

To Common Stock a/c $ 20000

To Premium on common stock account $ 30000

2. Dividend a/c Dr. $ 200000

To Dividend payable a/c $ 200000

( $ 4 * 50000 units)

3. Dividend payable a.c Dr. $ 200000

To bank a/c $ 200000

4. For reacquiring shares

Common Stock a/c Dr. $ 10000 ( 10000* $1)

Premium on common stock a/c Dr $ 120000 ( 10000* $12)

To Shareholder a/c $ 130000

For payment to share holder

Shareholder a/c Dr $ 130000

To Bank a/c $ 130000

5. Dividend a/c Dr. $ 4000

To Bank a/c $ 4000

working

Number of shares pending = 50000 - 10000 = 40000

Dividend per share = $ 1 *10% = $ 0.10

Total dividend = $ 0.10 * 40000 =$ 4000

Particular Amount ($) Cash 245000 Marketable Securites 185000 Account Receivable 124000 Merchandise Inventory 105000 Prepaid Insurance 3000 TOTAL 662000

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