Question 1 Partially correct Mark 10.00 out of 20.

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Question text Analyzing and Computing Average Issue Price and Treasury Stock Cost Following is the stockholders' equity section from the Campbell Soup Company balance sheet.
Shareholders' Equity (millions, except per share amounts) Preferred stock: authorized 40 shares; non issued Capital stock, $0.0375 par value; authorized 560 shares; issued 542 shares Additional paid-in capital Earnings retained in the business Capital stock in treasury, at cost Accumulated other comprehensive loss Total CampbellSoup Company shareowners' equity Noncontrolling interest Total equity August 3, 2008 $ -20 341 8,760 (7,459) (736) 926 3 $ 929 July 29, 2007 $ -20 332 8,288 (7,194) (718) 728 3 $ 731

Campbell Soup Company also reports the following statement of stockholders' equity.
Capital Stock (Millions, except per share amounts) Shares Balance at August 2, 2009 Comprehensive income (loss) Net earnings Foreign currency translation adjustments, net of tax Cash-flow hedges, net of tax Pension and postretirement ;benefits, net of tax Other comprehensive (loss) Total comprehensive income (loss) Dividends ($0.88 per share) Treasury stock purchased Treasury stock issued under management incentive and stock options plan Balance at August 1, 2010 542 $ 20 (14) 7 (472) 207 $ (7,459) 9 (372) 844 542 Issued Amount $ 20 In Treasury Shares Amount (199) $ (7,194) $ 332 $ 8,288 Additional Paid-in Capital Earnings Retained in the Business Accumulated Other Comprehensive Income (Loss)

$ (71

(5

(1

(206)

$ 341

$ 8,760

$ (73

(a) Campbell Soup Company reports $20 million in its Common Stock account. Which of the following statements best describes the manner in which this number is computed? The computation uses the number of issued shares multiplied by the par value of the stock. The computation uses the number of outstanding shares multiplied by the par value of the stock. The computation uses the number of outstanding shares multiplied by the market price of the stock. The computation uses the number of issued shares multiplied by the market value of the stock. Mark 1.00 out of 1.00

(b) At what average price were the Campbell Soup shares issued? (Round your answer to two decimal places.) $
0.66

(c) Reconcile the beginning and ending balances of retained earnings. ($ millions) Retained earnings, July 29, 2007
($ millions) Retained earnings, July 29, 2007 $

8288

Net earnings

844

Dividends

-372

Miscellaneous

Retained earnings, August 3, 2008 $

8760

(d) Campbell Soup reports a $112 gain as part of Accumulated Other Comprehensive Income relating to foreign currency translation adjustments. Which of the following statements best describes how this gain arose and its impact on income, if any?

Campbell Soup recognized the gain as a result of the translation of a foreign currencydenominated asset or liability and the gain increased net income for the year. Campbell Soup recognized the gain as a result of the translation of a foreign currencydenominated asset or liability and the gain increased accumulated other comprehensive income. Campbell Soup recognized a gain on a dividend that it received from a foreign company. Campbell Soup sold foreign currency and realized a gain on sale. Mark 1.00 out of 1.00

(e) Campbell Soup reports an increase in stockholders' equity relating to the exercise of stock options (titled "Treasury stock issued under management incentive and stock option plans"). This transaction involves the purchase of common stock by employees at a preset price. Which of the following statements best describes the nature of this transaction? The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of 2 million that was recognized as a reduction of Treasury Stock and an increase in Additional Paid-In Capital. The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of 2 million that was recognized as an increase in the Common Stock account only. The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of 2 million that was recognized as an increase in the Common Stock and in the Additional Paid-In Capital. The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of 2 million that was recognized as a gain on sale, thus increasing Retained Earnings. Mark 1.00 out of 1.00

(f) Which of the following statements best describes the transaction relating to the "Treasury stock purchased" line in the statement of stockholders' equity? Campbell Soup repurchased 26 million shares of common stock for a total of 3 million. This transaction had no effect on the components of Stockholders' Equity. Campbell Soup repurchased 26 million shares of common stock for a total of 3 million. The effect of the repurchase of stock is to reduce Cash and Stockholders' Equity. Campbell Soup repurchased 26 million shares of common stock for a total of 3 million. The effect of the repurchase of stock is to recognize a loss on the repurchase, thus reducing Cash and Retained Earnings. Campbell Soup repurchased 26 million shares of common stock for a total of 3 million. The effect of this transaction is to increase Stockholders' Equity. Mark 1.00 out of 1.00

Question 2 Correct Mark 20.00 out of 20.00

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Question text Analyzing Cash Dividends on Preferred and Common Stock Potter Company has outstanding 15,000 shares of $50 par value, 8% preferred stock and 50,000 shares of $5 par value common stock. During its first three years in business, it declared and paid no cash dividends in the first year, $280,000 in the second year, and $60,000 in the third year. (a) If the preferred stock is cumulative, determine the total amount of cash dividends paid to each class of stock in each of the three years.
Distibution to Preferred Year 1 $ Common Stock

0
$

Year 2 $

120000
$

160000

Year 3 $

60000
$

(b) If the preferred stock is noncumulative, determine the total amount of cash dividends paid to each class of stock in each of the three years.
Distibution to Preferred Year 1 $ Common Stock

0
$

Year 2 $

60000
$

220000

Year 3 $

60000
$

Question 3 Correct

Mark 30.00 out of 30.00

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Question text Identifying and Analyzing Financial Statement Effects of Dividends The stockholders' equity of Kinney Company at December 31, 2011, is shown below.
5% preferred stock, $100 par value, 10,000 shares authorized; 4,000 shares issued and outstanding Common stock, $5 par value, 200,000 shares authorized; 50,000 shares issued and outstanding Paid-in capital in excess of par valuepreferred stock Paid-in capital in excess of par valuecommon stock Retained earnings Total stockholders' equity $ 400,000 250,000 40,000 300,000 656,000 $1,646,000

The following transactions, among others, occurred during 2012: Apr. 1 Declared and issued a 100% stock dividend on all outstanding shares of common stock. The market value of the stock was $11 per share. Dec. 7 Declared and issued a 3% stock dividend on all outstanding shares of common stock. The market value of the stock was $14 per share. Dec. 20 Declared and paid (1) the annual cash dividend on the preferred stock and (2) a cash dividend of 80 cents per common share. (a) Use the financial statement effects template to indicate the effects of these separate transactions.
Balance Sheet Transaction Cash Asset + Noncash Assets = Liabilities + Contributed Capital + Earned Capital

0
Apr. 1

250000

-250000

0
Dec. 7

42000

-42000

-102400
Dec. 20

-102400

Income Statement

Revenue

Expenses

Net Income

Income Statement

Revenue

Expenses

Net Income

(b) Compute retained earnings for 2012 assuming that the company reports 2012 net income of $253,000. $
514600

Question 4 Correct Mark 30.00 out of 30.00

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Question text Identifying and Analyzing Financial Statement Effects of Stock Transactions The stockholders' equity of Verrecchia Company at December 31, 2011, follows:
Common stock, $ 5 par value, 350,000 shares authorized; 150,000 shares issued and outstanding Paid-in capital in excess of par value Retained earnings $ 750,000 600,000 346,000

During 2012, the following transactions occurred: Jan. 5 Issued 10,000 shares of common stock for $12 cash per share. Jan. 18 Purchased 4,000 shares of common stock for the treasury at $14 cash per share. Mar. 12 Sold one-fourth of the treasury shares acquired January 18 for $17 cash per share. July 17 Sold 500 shares of the remaining treasury stock for $13 cash per share. Oct. 1 Issued 5,000 shares of 8%, $25 par value preferred stock for $35 cash per share. This is the first issuance of preferred shares from the 50,000 authorized shares. (a) Use the financial statement effects template to indicate the effects of each transaction.

Balance Sheet Transaction Cash Asset + Noncash Assets = Liabilities + Contributed Capital + Earned Capital

120000
Jan. 5

120000

-56000
Jan. 18

-56000

17000
Mar. 12

17000

6500
July. 17

6500

175000
Oct. 1

175000

Income Statement

Revenue

Expenses

Net Income

(b) Prepare the December 31, 2012, stockholders' equity section of the balance sheet assuming that the company reports net income of $72,500 for the year.
Stockholders' Equity Paid-in capital $

125000

8% Preferred stock, $25 par value, 50,000 shares authorized, 5,000 shares issued and outstanding Common stock, $5 par value, 350,000 shares authorized; 160,000 shares issued

800000
$

925000

Stockholders' Equity Additional paid-in capital Paid-in capital in excess of par value-preferred stock

50000

Paid-in capital in excess of par value-common stock

670000

Paid-in capital from treasury stock

2500

722500

Total paid-in capital

1647500

Retained earnings

418500

2066000

Less: Treasury stock (2,500 shares) at cost

-35000

Total Stockholders' Equity $

2031000