Problem 1: Problem 2:

1. True 1. B 11. B 21
2. False 2. B 12. D Requirements: (1) the declaration
3. True 3. B 13. C 23-Jul Retained Earnings
4. True 4. B 14. A Share Premium
5. True 5. D 15. C Cash Dividend Payable
6. True 6. C 16. D (2) the payment of this dividend
7. False 7. B 17. B 23-Jul Cash Dividend Payable
8. True 8. B 18. A Cash
9. True 9. A 19. A 22
10. True 10. D 20. D Requirement a:
Ordinary Shares Outstanding
Less: Cash Dividend Declared

Less: Dividends Payable -Preferred

Dividends Payable-Common Stock

Requirement b:
31-Dec-02 Retained Earnings
Cash Dividends Payable
31-Dec-02 No Entry
31-Dec-02 Cash Dividends Payable
Cash

23
Requirement a:
(a)
Retained Earnings
Stock Dividends Payable
Share Premium
(b)
Memo Entry

(c)
Retained Earnings
Stock Dividends Payable

Table:
Oustanding Common
Shares Stock
(a) 460,000 9,200,000
(b) 800,000 8,000,000
(c) 800,000 16,000,000
24
Requirement:
* PPE
Revaluation Surplus

* Share Capital
Share Premium

* Revaluation Surplus
Share Premium
Retained Earnings
ained Earnings 65,000
re Premium 15,000
Cash Dividend Payable 80,000
e payment of this dividend
h Dividend Payable 80,000
80,000

Outstanding 400,000 Ordinary Shares Outstanding 400,000

nd Declared (200,000) Preferred Stock 200,000
200,000 600,000
ayable -Preferred (36,000) Multiply by: Cumulative rate 6%
able-Common Stock 164,000 Dividends Payable -Preferred 36,000

ained Earnings 200,000

Cash Dividends Payable 200,000

h Dividends Payable 200,000

200,000

ained Earnings 1,725,000

Stock Dividends Payable 1,380,000
Share Premium 345,000

ained Earnings 16,000,000

Stock Dividends Payable 16,000,000

Additional Paid-in Total Retained Total Stockholder's

Capital earnings Equity
2,700,000 9,300,000 21,200,000
2,400,000 10,800,000 21,200,000
2,400,000 2,800,000 21,200,000
360,000
360,000

640,000
640,000

360,000
640,000
1,000,000
Problem 3:
(1) Rondo Corp.
Statement of Retained Earnings
For Year Ended september 30, 2005

Retained Earnings,Oct. 1, 2001 860,000

Prior period adjustment- overstatement of 43,400
depreciation, net of income taxes of
18,600=(30% x 62,000)

Retained Earnings, October 1, 2001, as

restated 903,400
AdNet Income 75,000
LeCash Dividends Declared 16,400
Stock Dividends Declared 41,000 (57,400)
Retained Earnings, September 30, 2002 921,000

(2)
20-Sep-02 Retained Earnings 1,450,000
Property Dividends payable

(3)
1-Jun-01 Retained Earnings 3,000,000
Stock Dividends Payable

(4)
Requirement 1:
Cumulative preferred
Preferred dividends per year: 100,000 shares x P3
Paid
Preferred Dividends in 2000 150,000

Preferred Dividends in 2001:

Arrearage from 2000 75,000
Arearage from 2001
Total in arrears at 12/31/2001

Dividends for 2005:

Arrearage from years 2000 and 2001 375,000
Current Year preferred dividend 300,000
Total preferred dividends paid in 2002 675,000

Remainder to Common: (800,000 - 675,000) = 125,000

Common Dividends per share : (125,000/ 25,000) = P5 per share
Requirement 2:
Noncumulative preferred
Preferred dividends per year: 50,000 shares x P3 =
Dividends in arears for 2000: 0
Dividends in arears for 2001: 0
Dividends for 2002: 150,000
Total preferred dividends 150,000

Remainder to common: (800,000-150,000 )= 650,000

Common Dividends per share: (650,000/25,000 shares) = P26 per share
Requirement 3:
Cumulative preferred
Prefferred dividends per year : 70,000 shares x P6 =

Preferred dividends in 2000

Preferred dividends in 2001:
Arrearage from 2000
Arrearage from 2001
Total in arrears at 12/31/2001

Dividends for 2002:

Total Dividends paid in 2002
Arrearge from years 2000 and 2001
Amount available for preferred dividends in 2002
Total preferred dividends 800,000

(5)
1-Jul-02 Retained Earnings 1,540,000
Stock Dividends payable

1-Sep-02 Stock Dividends Payable 1,540,000

Ordinary Share capital

1-Jun-03 Retained Earnings 554,400

Stock Dividends Payable
Share Premium - Stock dividends
1-Aug-03 Stock Dividends Payable 462,000
Ordinary Share capital

(6)
Common Stock Description Shares
Issued during 2002 110,000
Reacquired during 2002 (6,000)
Outstanding on December 31, 2002 104,000
 Outstanding after 2-for-1 stock split,12/31/2002 208,000
10% stock dividend, April 12 20,800
Resale of treasury shares, Oct.17 12,000
Outstanding December 4, 2003 240,800

4-Dec-03 Retained Earnings 240,800

Cash Dividends Payable

Cash Dividends Payable 240,800

Cash
4-Dec-03 Retained Earnings 722,400
Property Dividends Payable
Gain on Impairment Recovery

Property Dividends Payable 602,000

Investment in associate

(7)
7-Jan-02 Retained Earnings 112,500
Cash Dividends Payable -Preferred Shares
7-Feb-02 Cash Dividends Payable -Preferred Shares 112,500
Cash
4-Mar-02 Retained Earnings 100,000
Cash Dividends Payable-Common Stock
18-Mar-02 Cash Dividends Payable-Common Stock 100,000
Cash
30-Jun-02 Memorandum Entry
9-Jul-02 Treasury Shares - Common Stock 384,000
Cash
10-Sep-02 Retained Earnings 315,200
Cash Dividends Payable-Common Stock
18-Sep-02 Cash Dividends Payable-Common Stock 315,200
Cash

(8)
Requirements:
(1)
31-Dec-02 Retained Earnings 295,000
PPE
31-Dec-02 Share Capital 125,000
Share Premium
31-Dec-02 Share Premium 225,000
Retained Earnings
 1,450,000

3,000,000

300,000
In Arrears
150,000

(75,000)
300,000
375,000
 150,000

26 per share

420,000
Paid In Arears
150,000 270,000

75,000 (75,000)
420,000
615,000

800,000
(615,000)
185,000

1,540,000

1,540,000

462,000
92,400

462,000
240,800

240,800

602,000
120,400

602,000

112,500

112,500

100,000

100,000

384,000

315,200

315,200

295,000

125,000

225,000
Problem 4:
Requirement (a) - Preference share is noncumulative

Total dividends declared 3,600,000

Allocation:
Allocation to preference shares(4M parx10%x 1 yr.) 400,000
Excess allocated to ordinary shares(1.8M -200,000) 3,200,000
As allocated -

Requirement (b) - Preference share is cumulative

Total dividends declared 3,600,000

Allocation:
Allocation to preference shares(4M x 10% x 3 yrs.) 1,200,000
Excess allocated to ordinary shares(1.8M-200,000) 2,400,000
As allocated -

Requirement © - Preference share is noncumulative and fully participating

Total dividends declared 3,600,000

Allocation:
Basic Allocation to Preference shares:
(4M par x 10% x 1 yr.) 400,000
Basic Allocation to Ordinary shares:
(16M x 10% x 1 yr.) 1,600,000
Excess subject to participation(3.6M - 400K-1.6M) 1,600,000
Participation of Preference Shares
(1,600,000 x 4M par / 20M par) 320,000
Participation of Ordinary Shares
(1,600,00 x 16M par/ 20M par) 1,280,000
As allocated -

The allocated amounts are reconciled with the total dividends declared as follows:
Total dividends declared 3,600,000
Total dividends allocated as :
Allocation to preference shares:
(400K basic + 320K Participation) 720,000
Allocation To ordinary Shares:
(1.6M basic + 1.28M Participation) 2,880,000
As allocated 3,600,000

Requirement (d) - Preference share is cumulative and fully participating

Total dividends declared 3,600,000
Allocation:
Basic Allocation to preference shares:
(4M par x 10% x 3yrs) 1,200,000
Basic Allocation to ordinary shares:
(16M par x 10% x 1 yr.) 1,600,000
Excess subject to participation 800,000
Participation of preference shares(800K x 4M/20M) 160,000
Participation of ordinary shares ( 800K x 16M/20M) 640,000
As allocated -

The allocated amounts are reconciled with the total dividends declared as follows:
Total dividends declared 3,600,000
Total dividends allocated as:
Allocation to preference shares:
(1.2M basic + 160K Participation) 1,360,000
Allocation to ordinary shares:
(1.6M basic + 640K Participation) 2,240,000
As allocated 3,600,000

Requirement e - Preference share is cumulative and participating up to 16%

Total dividends declared 3,600,000
Allocation:
Basic allocation to preference shares:
(4M par x 10% x 3yrs.) 1,200,000
Basic allocation to ordinary shares:
( 16M par x 10% x 1 yr.) 1,600,000
Excess subject to participation 800,000
Participation of Preference shares(4M par x (16% - 10%) 240,000
Excess allocated to ordinary shares(800K-240K) 560,000
As allocated -

The allocated amounts are reconciled with the total dividends declared as follows:
Total dividends declared 3,600,000
Total dividends allocated as:
Allocation to preference shares
(1.2M basic + 240K participation) 1,440,000
Allocation to ordinary shares:
(1.6M basic + 560K participation) 2,160,000
As allocated 3,600,000
Problem 5: Problem 6:
1. D 1. A
2. A 2. A
3. D 3. A
4. C 4. A
5. A 5. A
6. D 6. B
7. B 7. C
8. C 8. A
9. B 9. C
10. C 10. B