At December 31, 2013, the available-for-sale equity

portfolio for Steffi Graf, Inc. is as follows.

Security	Cost	Fair Value	Unrealized Gain (Loss)
A	$18,270	$15,660	$(2,610	)
B	13,050	14,616	1,566
C	24,012	26,622	2,610
Total	$55,332	$56,898	1,566
Previous fair value adjustment balance—Dr.	418
Fair value adjustment—Dr.	$1,148

On January 20, 2014, Steffi Graf, Inc. sold security A for $15,764. The sale proceeds are net of brokerage fees.

Steffi Graf Inc. reports net income in 2013 of $125,280 and in 2014 of $146,160. Total holding gains (including any realized holding gain or loss) total $41,760.

(a) Prepare a statement of comprehensive income for 2013 starting with net income.

STEFFI GRAF, INC Statement of Comprehensive Income For the Year Ended December31, 2013
Comprehensive IncomeHolding GainsHolding LossNet IncomeOther Comprehensive IncomeReclassification Adjustment for Gain Included in Net IncomeReclassification Adjustment for Loss Included in Net IncomeUnrealized Holding GainUnrealized Holding Loss	$
Comprehensive IncomeHolding GainsHolding LossNet IncomeOther Comprehensive IncomeReclassification Adjustment for Gain Included in Net IncomeReclassification Adjustment for Loss Included in Net IncomeUnrealized Holding GainUnrealized Holding Loss
Comprehensive Income    Holding Gains    Holding Loss    Net Income    Other Comprehensive Income    Reclassification Adjustment for Gain Included in Net Income    Reclassification Adjustment for Loss Included in Net Income    Unrealized Holding Gain    Unrealized Holding Loss
Comprehensive IncomeHolding GainsHolding LossNet IncomeOther Comprehensive IncomeReclassification Adjustment for Gain Included in Net IncomeReclassification Adjustment for Loss Included in Net IncomeUnrealized Holding GainUnrealized Holding Loss	$

(b) Prepare a statement of comprehensive income for 2014 starting with net income.

STEFFI GRAF, INC Statement of Comprehensive Income For the Year Ended December 31, 2014
Comprehensive IncomeHolding GainsHolding LossNet IncomeOther Comprehensive IncomeReclassification Adjustment for Gain Included in Net IncomeReclassification Adjustment for Loss Included in Net IncomeUnrealized Holding GainUnrealized Holding Loss	$
Comprehensive IncomeHolding GainsHolding LossNet IncomeOther Comprehensive IncomeReclassification Adjustment for Gain Included in Net IncomeReclassification Adjustment for Loss Included in Net IncomeUnrealized Holding GainUnrealized Holding Loss
Comprehensive Income    Holding Gains    Holding Loss    Net Income    Other Comprehensive Income    Reclassification Adjustment for Gain Included in Net Income    Reclassification Adjustment for Loss Included in Net Income    Unrealized Holding Gain    Unrealized Holding Loss	$
Add    Less    :   Comprehensive IncomeHolding GainsHolding LossNet IncomeOther Comprehensive IncomeReclassification Adjustment for Gain Included in Net IncomeReclassification Adjustment for Loss Included in Net IncomeUnrealized Holding GainUnrealized Holding Loss
Comprehensive IncomeHolding GainsHolding LossNet IncomeOther Comprehensive IncomeReclassification Adjustment for Gain Included in Net IncomeReclassification Adjustment for Loss Included in Net IncomeUnrealized Holding GainUnrealized Holding Loss	$
Unrealized Holding GainCurrent Period Other Comprehensive incomeEnding Balance, December 31, 2014Amount Reclassified from Accumulated Other Comprehensive IncomeAccumulated Other Comprehensive IncomeBeginning Balance, January 1, 2014
Amount Reclassified from Accumulated Other Comprehensive Income    Accumulated Other Comprehensive Income    Unrealized Holding Gain    Beginning Balance, January 1, 2014    Ending Balance, December 31, 2014    Current Period Other Comprehensive income	$
Amount Reclassified from Accumulated Other Comprehensive Income    Unrealized Holding Gain    Ending Balance, December 31, 2014    Accumulated Other Comprehensive Income    Beginning Balance, January 1, 2014    Current Period Other Comprehensive income	$
Current Period Other Comprehensive income    Amount Reclassified from Accumulated Other Comprehensive Income    Beginning Balance, January 1, 2014    Unrealized Holding Gain    Ending Balance, December 31, 2014    Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income    Ending Balance, December 31, 2014    Beginning Balance, January 1, 2014    Current Period Other Comprehensive income    Amount Reclassified from Accumulated Other Comprehensive Income    Unrealized Holding Gain
Beginning Balance, January 1, 2014    Current Period Other Comprehensive income    Unrealized Holding Gain    Ending Balance, December 31, 2014    Accumulated Other Comprehensive Income    Amount Reclassified from Accumulated Other Comprehensive Income

Question 1   Agassi Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Agassi employs a fiscal year ending May 31. Income from operations before income taxes for Agassi was $1,450,000 and $662,300, respectively, for fiscal years ended May 31, 2015 and 2014. Agassi experienced an extraordinary loss of $407,800 because of an earthquake on March 3, 2015. A 40% combined income tax rate pertains to any and all of Agassi Corporation’s profits, gains, and losses. Agassi’s capital structure consists of preferred stock and common stock. The company has not issued any convertible securities or warrants and there are no outstanding stock options. Agassi issued 46,600 shares of $100 par value, 6% cumulative preferred stock in 2011. All of this stock is outstanding, and no preferred dividends are in arrears. There were 1,058,400 shares of $1 par common stock outstanding on June 1, 2013. On September 1, 2013, Agassi sold an additional 381,600 shares of the common stock at $15 per share. Agassi distributed a 25% stock dividend on the common shares outstanding on December 1, 2014. These were the only common stock transactions during the past 2 fiscal years.

(a)       Determine the weighted-average number of common shares that would be used in computing earnings per share on the current comparative income statement for: Weighted-average number of common shares (1) The year ended May 31, 2014. (2) The year ended May 31, 2015.

2

The stockholders’ equity accounts of G.K. Chesterton Company have the following balances on December 31, 2014.

Common stock, $10 par, 348,000 shares issued and outstanding		$3,480,000
Paid-in capital in excess of par—common stock		1,202,000
Retained earnings		5,608,000

Shares of G.K. Chesterton Company stock are currently selling on the Midwest Stock Exchange at $42.

Prepare the appropriate journal entries for each of the following cases. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)

(a)		A stock dividend of 7% is (1) declared and (2) issued.
(b)		A stock dividend of 100% is (1) declared and (2) issued.
(c)		A 2-for-1 stock split is (1) declared and (2) issued.

No.	Account Titles and Explanation	Debit	Credit
(a) (1)
(a) (2)
(b) (1)
(b) (2)
(c) (1)
(c) (2)

 

Question	3

Penn Company was formed on July 1, 2012. It was authorized to issue 307,700 shares of $11 par value common stock and 104,800 shares of 8% $24 par value, cumulative and nonparticipating preferred stock. Penn Company has a July 1–June 30 fiscal year.

The following information relates to the stockholders’ equity accounts of Penn Company.

Common Stock
Prior to the 2014–2015 fiscal year, Penn Company had 114,800 shares of outstanding common stock issued as follows.

1.		89,800 shares were issued for cash on July 1, 2012, at $32 per share.
2.		On July 24, 2012, 5,000 shares were exchanged for a plot of land which cost the seller $79,900 in 2006 and had an estimated fair value of $229,600 on July 24, 2012.
3.		20,000 shares were issued on March 1, 2013, for $42 per share.

During the 2014–2015 fiscal year, the following transactions regarding common stock took place.

November 30, 2014		Penn purchased 2,300 shares of its own stock on the open market at $39 per share. Penn uses the cost method for treasury stock.
December 15, 2014		Penn declared a 5% stock dividend for stockholders of record on January 15, 2015, to be issued on January 31, 2015. Penn was having a liquidity problem and could not afford a cash dividend at the time. Penn’s common stock was selling at $51 per share on December 15, 2014.
June 20, 2015		Penn sold 440 shares of its own common stock that it had purchased on November 30, 2014, for $22,300.

Preferred Stock
Penn issued 41,900 shares of preferred stock at $45 per share on July 1, 2013.

Cash Dividends
Penn has followed a schedule of declaring cash dividends in December and June, with payment being made to stockholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2015, are shown below.

Declaration Date		Common Stock		Preferred Stock
12/15/13		$0.42 per share		$1 per share
6/15/14		$0.42 per share		$1 per share
12/15/14				$1 per share

No cash dividends were declared during June 2015 due to the company’s liquidity problems.

Retained Earnings
As of June 30, 2014, Penn’s retained earnings account had a balance of $691,700. For the fiscal year ending June 30, 2015, Penn reported net income of $41,900.

Prepare the stockholders’ equity section of the balance sheet, for Penn Company as of June 30, 2015, as it should appear in its annual report to the shareholders. (Enter account name only and do not provide descriptive information.)

PENN COMPANY Stockholders’ Equity June 30, 2015
Additional Paid-in Capital Capital Stock Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Property, Plant and Equipment Stockholders’ Equity Total Assets Total Capital Stock Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders’ Equity Total Long-term Investments Total Long-term Liabilities Total Paid-in Capital Total Paid-in Capital and Retained Earnings Total Property, Plant and Equipment Total Stockholders’ Equity
					$
Additional Paid-in Capital     Capital Stock     Current Assets     Current Liabilities     Intangible Assets     Long-term Investments     Long-term Liabilities     Property, Plant and Equipment     Stockholders’ Equity     Total Assets     Total Capital Stock     Total Current Assets     Total Current Liabilities     Total Intangible Assets     Total Liabilities     Total Liabilities and Stockholders’ Equity     Total Long-term Investments     Total Long-term Liabilities     Total Paid-in Capital     Total Paid-in Capital and Retained Earnings     Total Property, Plant and Equipment     Total Stockholders’ Equity
Additional Paid-in Capital Capital Stock Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Property, Plant and Equipment Stockholders’ Equity Total Assets Total Capital Stock Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders’ Equity Total Long-term Investments Total Long-term Liabilities Total Paid-in Capital Total Paid-in Capital and Retained Earnings Total Property, Plant and Equipment Total Stockholders’ Equity
			$
Additional Paid-in Capital     Capital Stock     Current Assets     Current Liabilities     Intangible Assets     Long-term Investments     Long-term Liabilities     Property, Plant and Equipment     Stockholders’ Equity     Total Assets     Total Capital Stock     Total Current Assets     Total Current Liabilities     Total Intangible Assets     Total Liabilities     Total Liabilities and Stockholders’ Equity     Total Long-term Investments     Total Long-term Liabilities     Total Paid-in Capital     Total Paid-in Capital and Retained Earnings     Total Property, Plant and Equipment     Total Stockholders’ Equity
Additional Paid-in Capital Capital Stock Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Property, Plant and Equipment Stockholders’ Equity Total Assets Total Capital Stock Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders’ Equity Total Long-term Investments Total Long-term Liabilities Total Paid-in Capital Total Paid-in Capital and Retained Earnings Total Property, Plant and Equipment Total Stockholders’ Equity
Add Less :
Additional Paid-in Capital     Capital Stock     Current Assets     Current Liabilities     Intangible Assets     Long-term Investments     Long-term Liabilities     Property, Plant and Equipment     Stockholders’ Equity     Total Assets     Total Capital Stock     Total Current Assets     Total Current Liabilities     Total Intangible Assets     Total Liabilities     Total Liabilities and Stockholders’ Equity     Total Long-term Investments     Total Long-term Liabilities     Total Paid-in Capital     Total Paid-in Capital and Retained Earnings     Total Property, Plant and Equipment     Total Stockholders’ Equity					$

 

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