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Chapter 13

Accounting for Corporations

QUESTIONS1. Organization expenses (costs are incurre! in creating a corporation. Exa"p#es inc#u!e$

#ega# fees% pro"oter fees% accountant fees% costs of printing stoc& certificates% an! fees pai!to o'tain a state charter.

. Organization expenses (costs are reporte! as expenses )hen incurre!*as part of operating

expenses. (Instructor note:+rior to SO+ ,-/% organization costs )ere c#assifie! as part ofintangi'#e assets an! then a##ocate! to a"ortization expense.

3. The 'oar! of !irectors of a corporation is responsi'#e for !irecting the corporation0s affairs.The !irectors are e#ecte! ' the corporation2s stoc&ho#!ers.

. The pree"pti4e right of co""on stoc&ho#!ers is the right to "aintain their re#ati4eo)nership interests in the corporation ' ha4ing the first opportunit to purchase theirproportionate share of an a!!itiona# co""on shares issue! ' the corporation.

/. The genera# rights of co""on stoc&ho#!ers inc#u!e$ (1 the right to 4ote in stoc&ho#!ers2"eetings% ( the right to se## or other)ise !ispose of stoc&% (3 the pree"pti4e right% ( theright to share proportionate# in !i4i!en!s% an! (/ the right to share proportionate# in assetsre"aining after the cre!itors are pai! )hen% an! if% the corporation is #i5ui!ate!. In a!!ition%stoc&ho#!ers ha4e the genera# right to recei4e ti"e# an! usefu# financia# reports that!escri'e the corporation2s financia# position an! the resu#ts of its acti4ities.

6. Con4erti'#e preferre! stoc& is potentia## attracti4e 'ecause it offers the safet of a regu#arreturn as )e## as the opportunit to share in the increase! 4a#ue of the issuer2s co""onstoc& through con4ersion (or potentia# con4ersion.

7. The par 4a#ue is an arbitrary4a#ue p#ace! on a share of stoc& )hen it is authorize!. The ca##price is an a"ount that a corporation "ust pa if it exercises the option to 'u 'ac& an!retire a share of ca##a'#e preferre! stoc&.

-. The three i"portant !ates go4erning !i4i!en!s are$

a !ate of !ec#arationthe !ate the !irectors 4ote to pa a !i4i!en!.

' !ate of recor!a future !ate specifie! ' the !irectors to i!entif the particu#arshareho#!ers that are to recei4e the !i4i!en!.

c !ate of pa"entthe !ate )hen shareho#!ers recei4e the !i4i!en! pa"ent.

,. Cash !i4i!en!s !e'ite! against contri'ute! capita# accounts are ca##e! #i5ui!ating !i4i!en!s'ecause the represent a return of a"ounts origina## in4este! in the corporation ' thestoc&ho#!ers. (The are a return of% not a return on% capita# contri'utions.

McGraw-Hill Companies, Inc., 2005

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18. 9ec#aring a stoc& !i4i!en! has no effect on assets% #ia'i#ities% or tota# e5uit. A#so% thesu'se5uent !istri'ution of the stoc& !i4i!en! has no effect on these ite"s. Instea!% the stoc&!i4i!en! si"p# increases the nu"'er of shares outstan!ing an! resu#ts in a transfer ofe5uit fro" retaine! earnings to contri'ute! capita#.

11. A stoc& !i4i!en! resu#ts in a !istri'ution of a!!itiona# shares to stoc&ho#!ers an! the

capita#ization of retaine! earnings. A stoc& sp#it ca##s in the o#! shares an! rep#aces the")ith a !ifferent nu"'er of ne) shares )ith a ne) par 4a#ue. A#so% no entr is "a!e to an ofthe e5uit accounts )ith a stoc& sp#it. In spite of these technica# !ifferences% there is nopractica# !ifference in "ost cases 'et)een a stoc& sp#it an! a #arge stoc& !i4i!en!.

1. A stoc& !i4i!en! shou#! not 'e consi!ere! inco"e 'ecause it !oes not transfer an assetsfro" the corporation to the stoc&ho#!ers.

13. A treasur stoc& purchase re!uces tota# assets an! tota# e5uit ' the sa"e a"ount.

1. Treasur stoc& purchases affect the corporate assets an! stoc&ho#!ers2 e5uit :ust #i&e acash !i4i!en!. To &eep a co"pan fro" !issipating its assets ' paing an inor!inatea"ount of !i4i!en!s to its stoc&ho#!ers% state #a)s protect the co"pan2s cre!itors 'i"posing #i"its on treasur stoc& purchases.

1/. This gain is consi!ere! to 'e unusua# 'ut not infre5uent. It )ou#! 'e inc#u!e! in theca#cu#ation of inco"e fro" continuing operations% )ith other unusua# or infre5uent gains an!#osses*in a categor often #a'e#e! Other ;ains an!

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Cash........................................................................... -%888 'ai$ cas $i*i$en$ to common.


#un$amental %ccountin& 'rinciples, !(t)$ition

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Quic& Stu! 13/ (18 "inutes

Cata#ina Co"panStoc&ho#!ers2 E5uit

Apri# (after stoc& !i4i!en!

Co""on stoc&@/ par 4a#ue% 37/%888 sharesauthorize!% 16/%888 shares issue! an! outstan!ing ................ @ -/%888

Contri'ute! capita# in excess of par 4a#ue% co""on stoc&......... 6/%/88Tota# contri'ute! capita# ................................................................. 1%77%/88Getaine! earnings ........................................................................... /-%888Tota# stoc&ho#!ers0 e5uit .............................................................. @1%73/%/88

Supporting )or&

Apr. Getaine! Earnings...........................................................37/%888 Co""on Stoc&F......................................................... 7/%888 Contri'ute! Capita# in Excess of +ar a#ue% Co""on Stoc&FF.................................. 388%888 /o recor$ $eclaration an$ $istribution

o a !0 common stoc+ $i*i$en$.F 1/8%888 shares x 18 x @/ par 4a#ue

FF 1/8%888 shares x 18 x (@/ "ar&et 4a#ue @/ par 4a#ue

Quic& Stu! 136 (18 "inutes

Da 3 Treasur Stoc& (3%888 shares.......................................7%888 Cash........................................................................... 7%888 'urcase$ treasury stoc+ 12(,000 3 ",000 sares 4 per sare cost6.

No4. Cash.................................................................................7%8-8

Treasur Stoc& (7/8 x @,F....................................... 6%7/8

Contri'ute! Capita#% Treasur Stoc&...................... 338 7eissue$ treasury stoc+ at a price

&reater tan its cost. FCost of treasur share$ @7%8883%888 shares B @, per share Cost of 7/8 treasur shares$ @, per share x 7/8 shares B @6%7/8


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Ti"e +erio!Outstan!ing

SharesEffect of9i4i!en!

Kraction ofLear

=eighte!A4erage

HanuarDarch.............. 1/8%888 x 1.1 x 31 B 1%/8Apri#Da....................... 13-%888 x 1.1 x 1 B /%388

Hune9ece"'er............ 1/1%-88F x 1.8 x 71 B --%//8

=eighte!a4erage shares outstan!ing 1//%188

F 13-%888 shares x 1.1


Tota# stoc&ho#!ers0 e5uit.................................................................. @,8%888

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EMEGCISES

Exercise 131 (1/ "inutes

Characteristic Corporations1. O)ner authorit an! contro#......................One 4ote per share

. Ease of for"ation........................................Ge5uires go4ern"ent appro4a#

3. Transfera'i#it of o)nership.......................Gea!i# transferre!

. A'i#it to raise #arge a"ounts of capita#......igh a'i#it

/. 9uration of #ife.............................................Un#i"ite!

6. O)ner #ia'i#it..............................................

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Exercise 133 (1/ "inutes

1. Organization Expenses.................................................... 38%888 Co""on Stoc&% No+ar a#ue................................... 38%888 Issue$ stoc+ to promoters.

. Organization Expenses.................................................... 38%888 Co""on Stoc&% @1 State! a#ue............................... %888 Contri'ute! Capita# in Excess of State!

a#ue% Co""on Stoc&............................................. -%888 Issue$ stoc+ to promoters.

3. Cash 78%888 Co""on Stoc&% @18 +ar a#ue.................................. 8%888 Contri'ute! Capita# in Excess of +ar

a#ue% Co""on Stoc&............................................. 38%888 Issue$ common stoc+ or cas.

. Cash 18%888 +referre! Stoc&% @188 +ar a#ue................................. 188%888 Contri'ute! Capita# in Excess of +ar

a#ue% +referre! Stoc&.............................................. 8%888 Issue$ preerre$ stoc+ or cas.

Exercise 13 (18 "inutes

1. E

. 9

3. C

. J

/. A

6. K


#un$amental %ccountin& 'rinciples, !(t)$ition!0

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Exercise 13/ (38 "inutes

+referre! Co""on883 (@18%888 pai!+referre!F....................................................... @18%888

Co""onre"ain!er.................................... @ 8Tota# for the ear........................................... @18%888 @ 8

88 (@%888 pai!+referre!F....................................................... @%888Co""onre"ain!er.................................... @ 8Tota# for the ear........................................... @%888 @ 8

88/ (@188%888 pai!+referre!F....................................................... @38%888

Co""on

re"ain!er.................................... @ 78%888Tota# for the ear........................................... @38%888 @ 78%888

886 (@1,6%888 pai!+referre!F....................................................... @38%888Co""onre"ain!er.................................... @166%888Tota# for the ear........................................... @38%888 @166%888

883886 (@338%888 pai! Tota# for four ears....................................... @,%888 @36%888

F The ho#!ers of the noncu"u#ati4e preferre! stoc& are entit#e! to no "ore than@38%888 of !i4i!en!s in an one ear (7./ x @18 x 8%888 shares.


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Exercise 136 (/ "inutes

+referre! Co""on883 (@18%888 pai!+referre!F....................................................... @ 18%888

Co""onre"ain!er.................................... @ 8Tota# for the ear........................................... @ 18%888 @ 8

(Note$ @8%888 in preferre! stoc& !i4i!en!s in arrears.

88 (@%888 pai!+referre!arrears fro" 883...................... @ 8%888+referre!F....................................................... %888Co""onre"ain!er.................................... @ 8Tota# for the ear........................................... @ %888 @ 8

(Note$ @6%888 in preferre! stoc& !i4i!en!s in arrears.

88/ (@188%888 pai!+referre!arrears fro" 88...................... @ 6%888+referre!F....................................................... 38%888Co""onre"ain!er.................................... @ %888Tota# for the ear........................................... @ /6%888 @ %888

(Note$ @8 in preferre! stoc& !i4i!en!s in arrears.

886 (@1,6%888 pai!+referre!F....................................................... @ 38%888

Co""on

re"ain!er.................................... @166%888Tota# for the ear........................................... @ 38%888 @166%888

(Note$ @8 in preferre! stoc& !i4i!en!s in arrears.

883886 (@338%888 pai! Tota# for four ears....................................... @18%888 @18%888

F The ho#!ers of the cu"u#ati4e preferre! stoc& are entit#e! to no "ore than@38%888 of !i4i!en!s !ec#are! in an ear (7./ x @18 x 8%888 shares p#usan !i4i!en!s s&ippe! in prior ears.



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1. a. Getaine! earnings

Jefore !i4i!en!........................................................................ @ 338%888@18 par 4a#ue of /%888 !i4i!en! shares............................... (/8%888

After !i4i!en!........................................................................... @ -8%888

'. Tota# stoc&ho#!ers2 e5uitCo""on stoc&@18 par 4a#ue% 68%888 shares

authorize!% /8%888 shares issue! an! outstan!ing........... @ /88%888

Contri'ute! capita# in excess of par 4a#ue............................ 188%888Tota# contri'ute! capita#.......................................................... 688%888

Getaine! earnings.................................................................... -8%888

Tota# stoc&ho#!ers2 e5uit....................................................... @ 6-8%888

c. Nu"'er of outstan!ing sharesOutstan!ing shares 'efore the !i4i!en!.............................. /%8889i4i!en! shares...................................................................... /%888Outstan!ing shares after the !i4i!en!................................. /8%888

. a. Getaine! earnings (no change

Jefore an! after !i4i!en!........................................................ @ 338%888

'. Tota# stoc&ho#!ers2 e5uit

Co""on stoc&@/ par 4a#ue% 18%888 sharesauthorize!% /8%888 shares issue! an! outstan!ing........... @ /8%888

Contri'ute! capita# in excess of par 4a#ue............................ 188%888Tota# contri'ute! capita#.......................................................... 3/8%888

Getaine! earnings.................................................................... 338%888

Tota# stoc&ho#!ers2 e5uit....................................................... @ 6-8%888

c. Nu"'er of outstan!ing sharesOutstan!ing shares 'efore the sp#it....................................... /%888A!!itiona# sp#it shares (for1.............................................. /%888

Outstan!ing shares after the sp#it.......................................... /8%888

3. Kro" a stoc&ho#!er2s point of 4ie)% there is no practica#!ifference 'et)een the stoc& !i4i!en! an! the stoc& sp#it.The nu"'er of shares )i## 'e increase! e5ui4a#ent#un!er either approach% an! the "ar&et 4a#ue change% ifan% shou#! 'e approxi"ate# the sa"e.


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Exercise 13- (/ "inutes

1. Ke'. / Getaine! Earnings..........................................................-8%888

Co""on Stoc& 9i4i!en! 9istri'uta'#e.................. 388%888 Contri'ute! Capita# in Excess of +ar%

Co""on Stoc&...................................................... 1-8%888 eclare$ 20 common stoc+ $i*i$en$

180,000 20 06.

Ke'.- Co""on Stoc& 9i4i!en! 9istri'uta'#e........................388%888 Co""on Stoc&% @/ +ar a#ue................................ 388%888 istribute$ common stoc+ $i*i$en$.

.Jefore After

Tota# stoc&ho#!ers2 e5uit......................... @%788%888 @%788%888

Issue! an! !istri'uta'#e shares............... 68%888 7%888Joo& 4a#ue per share................................. @ /.88 @ 37./8

Shares o)ne!............................................. x 7/8 M ,88FTota# 'oo& 4a#ue of shares........................ @ 33%7/8 @ 33%7/8

F 7/8 shares x 18 B ,88 shares.

3.Ke'ruar / Ke'ruar -

Dar&et 4a#ue per share.............................. @ 8 @ 3.88Shares o)ne!............................................. x 7/8 x ,88

Tota# "ar&et 4a#ue of shares o)ne!........ @38%888 @38%688

Note$ The tota# "ar&et 4a#ue of the in4estor2s ho#!ings is approxi"ate# thesa"e for Ke'ruar / an! Ke'ruar -. Assu"ing that the stoc& !i4i!en! is theon# 4a#uere#e4ant infor"atione4ent 'et)een Ke'ruar /than! Ke'ruar -th%these per share 4a#ues high#ight the #ac& of 4a#ue !istri'ute! in a stoc&!i4i!en!.

Exercise 13, (/ "inutes

1.

Oct. 11 Treasur Stoc& (%/88 x @38.........................................13/%888 Cash........................................................................... 13/%888 'urcase$ treasury stoc+.

No4. 1 Cash (1%88 x @36..........................................................3%88 Treasur Stoc& (1%88 x @38................................... 36%888 Contri'ute! Capita#% Treasur Stoc&...................... 7%88 7eissue$ treasury stoc+ at a price ecee$in& cost.


#un$amental %ccountin& 'rinciples, !(t)$ition!

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Exercise 13, 1Conclu$e$6

No4. / Cash (3%388 x @/..........................................................-%/88Contri'ute! Capita#% Treasur Stoc&............................7%88Getaine! Earnings..........................................................,%388

Treasur Stoc& (3%388 x @38................................... ,,%888 7eissue$ treasury stoc+ at a price less tan cost.

. Changes to the e5uit section inc#u!e the fo##o)ing(i The co""on stoc& account !escription #ine )i## change. After the

treasur stoc& purchase% it shou#! rea!$

Co""on stoc&@18 par 4a#ue 36%888 sharesauthorize! an! issue! %/88 shares in treasur.................@368%888

The !o##ar 'a#ance of this account !oes not change )ith a treasurstoc& purchase.

(ii The !escriptions an! !o##ar a"ounts for Contri'ute! Capita# inExcess of +ar a#ue% Co""on Stoc&% an! for Tota# Contri'ute!Capita# )i## not change.

(iii The retaine! earnings !o##ar 'a#ance )i## not change 'ut its!escription shou#! change to$

Getaine! earnings(@13/%888 restricte! for treasur stoc&.............@3%888

(i4 After the purchase% a !e!uction for the cost of treasur stoc& isreporte! i""e!iate# 'efore the tota# #ine for stoc&ho#!ers2 e5uit as$

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1. The inco"e state"ent for 886 an! thereafter (ears 88788, )i##report !epreciation expense of @33%7/8 (the straight#ine a"ount.

. Since Kast Te& is su':ect to 3/ inco"e tax% the aftertax effect of thischange is @37%37/ (@/7%/88 x P18.3/. Therefore% the 886 inco"estate"ent )i## report an aftertax cu"u#ati4e effect of a change inaccounting princip#e e5ua# to @37%37/ as an increase to net inco"e.

Exercise 1313 (/ "inutes

1. Net inco"e.....................................................................................@1%3/8%888

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Jasic earnings per share............................................................. @.1,



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Exercise 131/ (8 "inutes

1.Tota# stoc&ho#!ers2 e5uit.............................................. @ 7,%/88

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............. 8.88 36.88 B 6.7

Ana#sis$ Stoc&s )ith +E ratios #ess than a'out / to - are #i&e# 4ie)e! aspotentia## un!er4a#ue! ' the "ar&et. Of the stoc&s a'o4e% an ana#st"ight in4estigate stoc& R as possi'# un!er4a#ue! )ith a +E ratio of 6.7.


#un$amental %ccountin& 'rinciples, !(t)$ition20

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+GOJ

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+ro'#e" 13A (68 "inutes

'art !

Han. 1 Treasur Stoc&% Co""on..............................................8%888 Cash........................................................................... 8%888 'urcase$ treasury stoc+ 12,000 206.

Han. / Getaine! Earnings..........................................................36%888 Co""on 9i4i!en! +aa'#e..................................... 36%888 eclare$ 2 $i*i$en$ on !9,000 outstan$in& sares.

Ke'. - Co""on 9i4i!en! +aa'#e...........................................36%888 Cash........................................................................... 36%888 'ai$ cas $i*i$en$.

Hu# 6 CashF...............................................................................1-%888

Treasur Stoc&% Co""onFF..................................... 1/%888 Contri'ute! Capita#% Treasur Stoc&FFF.................. 3%888 7eissue$ treasury stoc+.

;1(50 26 ;;1(50 206 ;;;1(50 6

Aug. CashF...............................................................................1%/8Contri'ute! Capita#% Treasur Stoc&............................3%888Getaine! Earnings.......................................................... 7/8 Treasur Stoc&% Co""onFF..................................... /%888 7eissue$ treasury stoc+. ;1!,250 !(6 ;;1!,250 206

Sept. / Getaine! Earnings..........................................................8%888 Co""on 9i4i!en! +aa'#e..................................... 8%888 eclare$ 2 $i*i$en$ on 20,000 outstan$in& sares.

Oct. - Co""on 9i4i!en! +aa'#e...........................................8%888 Cash........................................................................... 8%888 'ai$ cas $i*i$en$.

9ec. 31 Inco"e Su""ar...........................................................1,%888

Getaine! Earnings.................................................... 1,%888 Close$ Income Summary account.



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+ro'#e" 13A (Conclu$e$6

'art 2

CONTEMT COG+OGATIONState"ent of Getaine! Earnings

Kor Lear En!e! 9ece"'er 31% 886

Getaine! earnings% 9ec. 31% 88/..................................... @13/%888+#us net inco"e.................................................................. 1,%888

3,%888

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+ro'#e" 133A (/ "inutes

'art !Exp#anations for each of the :ourna# entries

Oct. 9ec#are! a cash !i4i!en! of @ per share of co""on stoc&.(@18%888 68%888 shares

Oct. / +ai! the cash !i4i!en! on co""on stoc&.

Oct. 31 9ec#are! a 18 stoc& !i4i!en! )hen the "ar&et 4a#ue is @/ pershare. (@7%888@1 par B 6%888 shares B 18 of 68%888 shares@1/8%8886%888 shares B @/ per share

No4. / 9istri'ute! the co""on stoc& !i4i!en!.

9ec. 1 Execute! a 3for1 stoc& sp#it. (@1 par @ par B 3for1 ratio

9ec. 31 C#ose! the Inco"e Su""ar account to Getaine! Earnings.

'art 2

Oct. Oct. / Oct. 31 No4. / 9ec. 1 9ec. 31

Co""on stoc&......... @ 78%888 @ 78%888 @ 78%888 @ 7,%888 @ 7,%888 @ 7,%888

Co""on stoc&!i4i!en! !istri'uta'#e. . 8 8 7%888 8 8 8

Contri'ute! capita# in

excess of par.......... 1-8%888 1-8%888 /-%888 /-%888 /-%888 /-%888

Getaine! earnings...... /8%888 /8%888 378%888 378%888 378%888 7,8%888

Tota# e5uit............... @1%8%888 @1%8%888 @1%8%888 @1%8%888 @1%8%888 @1%-8%888



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'art !

Outstan!ing co""on sharesHan. / Apr. / Hu# / Oct. /

Jeginning 'a#ance..........................8%888 8%888 8%888 8%888

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+ro'#e" 13/A (68 "inutes

'art !

Effect of inco"e taxes (!e'its or #osses in parentheses

+retax

38 Tax

Effect AfterTax

h. Cu"u#ati4e effect of change in accounting princip#e.....@(63%888 @(1-%,88 @(%188

:.

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+ro'#e" 13/A 1Conclu$e$6

'art " Inco"e fro" !iscontinue! seg"ent

:.

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'art !

Les

genera## accepte! accounting princip#es a##o) the !epreciation changeto 'e "a!e as #ong as the change can 'e :ustifie! as pro!ucing "ore usefu#financia# state"ents. Consistenc )ith other co"panies in the in!ustr isoften a satisfactor :ustification.

'art 2 9ou'#e!ec#ining'a#ance !epreciation (Gate B 8

JeginningLearJoo& a#ue

9epreciationExpense

LearEn!Joo& a#ue

883................................... @688%888 @8%888 @368%88888................................... 368%888 1%888 16%88888/................................... 16%888 -6%88 1,%688Tota#................................ @78%88

'art " Straight#ine !epreciation


9epreciationExpenseF

LearEn!Joo& a#ue

883................................... @688%888 @11%888 @-6%88888................................... -6%888 11%888 37%88888/................................... 37%888 11%888 /-%888Tota#................................ @3%888

;Annua# a"ount B (@688%888 @38%888 / ears B @11%888

'art

+retax cu"u#ati4e effect of the accounting change(see 'oo&% part ..........................................................................@1-%88

Aftertax cu"u#ati4e effect of the accounting change(@1-%88 x P18.38......................................................................@ -,%--8



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+ro'#e" 136A 1Conclu$e$6

'art 5

The cu"u#ati4e effect shou#! 'e reporte! in the #o)er section of the inco"estate"ent after an extraor!inar ite"s 'ut 'efore net inco"e. It )i## increaseinco"e 'ecause it resu#ts fro" a retroacti4e restate"ent of the asset to a

higher 'oo& 4a#ue.

'art 8

The 886 inco"e state"ent )i## report !epreciation expense of @11%888. Thisa"ount is the !epreciation expense using the straight#ine "etho!.

'art (

)ect o error on inancial statements

On the 886 inco"e state"ent% the pretax cu"u#ati4e effect of the changefro" !ou'#e!ec#ining 'a#ance to straight#ine !epreciation of @1-%88 (fro"part ( #ess the 886 straight#ine !epreciation of @11%888 ie#!s an increaseto inco"e 'efore taxes of @1%88. Therefore% treating it as a change in anaccounting esti"ate (accounte! for in current an! future perio!s )ou#! resu#tin an un!erstate"ent of inco"e 'efore taxes ' @6%88 (@,%-88 F @1%88.This "eans net inco"e (aftertax )ou#! 'e un!erstate! ' @%,8 Pco"pute!as @6%88 x (1 .38.

On the 886 'a#ance sheet% retaine! earnings )ou#! 'e un!erstate! '@%,8% inco"e taxes paa'#e )ou#! 'e un!erstate! ' @1,%68 (@6%88 x .38% an! assets )ou#! 'e un!erstate! ' @6%88.

F Supporting co"putation9epreciation expense for 886$If s)itching !epreciation "etho!s is treate! as a change in anaccounting esti"ate% then the straight#ine !epreciation a"ountis co"pute! an! reporte! in 886 as fo##o)s$

Joo& 4a#ue% Hanuar 1% 886.....................................................................@ 1,%688

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+ro'#e" 137A (68 "inutes

'art ! Lear 883 )eighte!a4erage shares


SharesEffect

of 9i4i!en!Kractionof Lear

=eighte!A4erage

HanuarDarch..................8%888 x 1.1 x 31 B 11%888Apri#Hune..........................36%888 x 1.1 x 31 B ,%,88Hu#Septe"'er................-%888 x 1.1 x 31 B 13%88Octo'er9ece"'er.........../%-88 x 1.8 x 31 B 13%88=eighte!a4erage shares outstan!ing 7%388

'art 2 Lear 883 earnings per share co"ponents

Geporte!

Tota#

9i4i!e!

' Shares

Earnings

per ShareInco"e fro" continuing operations......... @137%/88 7%388 @.,1

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'art 5 Lear 88/ )eighte!a4erage shares


SharesEffect of

Sp#itKractionof Lear

=eighte!A4erage

HanuarHu#..................... 6%888 x 3 x 71 B 11%888August............................... -%888 x 3 x 11 B 1%888Septe"'er......................... -8%888 x 3 x 11 B 8%888Octo'er9ece"'er...........8%888 x 1 x 31 B 68%888=eighte!a4erage shares outstan!ing 13%888

'art 8 Lear 88/ earnings per share co"ponents

Geporte!

Tota#

9i4i!e! '

Shares

Earningsper Share

Inco"e fro" continuing operations......... @167%888 13%888 @ 8.7-Extraor!inar #oss...................................... (78%888 13%888 (8 .33Net inco"e.................................................. @ ,7%888 13%888 @ 8 ./FF

FF A!:uste! for roun!ing.

'art (

Of the three earnings per share figures in part 6% inco"e fro" continuing

operations is "ost #i&e# the 'est pre!ictor of 886 resu#ts. =e "ight a#so)ant to factor in an tren! in earnings per share (a!:uste! for the stoc& sp#it.J !efinition% the 88/ extraor!inar #oss is 'oth unusua# an! infre5uent an!therefore extre"e# un#i&e# to occur again in 886. o)e4er% the nature of theextraor!inar #oss nee!s to 'e consi!ere!% an! its i"pact on future operationsnee!s to 'e e4a#uate!. Kor exa"p#e% if the extraor!inar #oss )as !ue to af#oo! that occurre! in 9ece"'er that !a"age! the p#ant% then pro!uction)ou#! "ost #i&e# 'e i"paire! in 886% resu#ting in a !ecrease in inco"e fro"continuing operations.


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+ro'#e" 13-A (8 "inutes

1. Dar&et price B @178 per share (current stoc& exchange price gi4en

. Co"putation of stoc& par 4a#ues

+referre!$ +ai!in a"ount Nu"'er of shares B @188%888 1%888 B @188

Co""on$ +ai!in a"ount Nu"'er of shares B @168%888 %888 B @8

3. Joo& 4a#ues )ith no !i4i!en!s in arrears

Joo& 4a#ue per preferre! share B par 4a#ue ()hen not ca##a'#e B @188Co""on stoc&Tota# e5uit................................................ @ /68%888

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+GOJ

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'art !

Han. 18 Treasur Stoc&% Co""on..............................................8%888 Cash........................................................................... 8%888 'urcase$ treasury stoc+ 120,000 !26.

Dar. Getaine! Earnings..........................................................18%888 Co""on 9i4i!en! +aa'#e..................................... 18%888 eclare$ !.50 $i*i$en$ on 90,000 outstan$in& sares.

Dar. 31 Co""on 9i4i!en! +aa'#e...........................................18%888 Cash........................................................................... 18%888 'ai$ cas $i*i$en$.

No4. 11 CashF 1/6%888 Treasur Stoc&% Co""onFF..................................... 1%888 Contri'ute! Capita#% Treasur Stoc&FFF.................. 1%888 7eissue$ treasury stoc+. ;1!2,000 !"6 ;;1!2,000 !26 ;;;1!2,000 !6

No4. / CashF...............................................................................76%888Contri'ute! Capita#% Treasur Stoc&............................ 1%888Getaine! Earnings.......................................................... -%888 Treasur Stoc&% Co""onFF..................................... ,6%888 7eissue$ treasury stoc+. ;19,000 .506 ;;19,000 !26

9ec. 1 Getaine! Earnings........................................................../8%888 Co""on 9i4i!en! +aa'#e..................................... /8%888 eclare$ 2.50 $i*i$en$ on !00,000 outstan$in& sares.

9ec. 31 Inco"e Su""ar.........................................................../36%888 Getaine! Earnings.................................................... /36%888 Close$ Income Summary account.


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+ro'#e" 13J (Conclu$e$6

'art 2

JALCOGE COG+.State"ent of Getaine! Earnings

Kor Lear En!e! 9ece"'er 31% 886Getaine! earnings% 9ec. 31% 88/..................................... @1%8-8%888+#us net inco"e.................................................................. /36%888

1%616%888

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+ro'#e" 133J (/ "inutes

'art !Exp#anations for each of the :ourna# entries

Han. 17 9ec#are! a cash !i4i!en! of @1 per share of co""on stoc&.

(@-%888 -%888 shares

Ke'. / +ai! the cash !i4i!en! on co""on stoc&.

Ke'. - 9ec#are! a 1./ stoc& !i4i!en! )hen the "ar&et 4a#ue is @1 pershare. (@68%888 @18 par B 6%888 shares B 1./ of -%888 shares@16%888 6%888 shares B @1 per share

Dar. 1 9istri'ute! the co""on stoc& !i4i!en!.

Dar. / Execute! a for1 stoc& sp#it. (@18 par @/ par B for1 ratio

Dar. 31 C#ose! the Inco"e Su""ar account to Getaine! Earnings.

'art 2

Han. 17 Ke'. / Ke'. - Dar. 1 Dar. / Dar. 31

Co""on stoc&.........@ -8%888 @ -8%888 @ -8%888 @ /8%888 @ /8%888 @ /8%888

Co""on stoc&!i4i!en! !istri'uta'#e. . 8 8 68%888 8 8 8

Contri'ute! capita# in

excess of par........... 1,%888 1,%888 /-%888 /-%888 /-%888 /-%888

Getaine! earnings...... 7/%888 7/%888 66%888 66%888 66%888 ,-6%888

Tota# e5uit...............@1%%888 @1%%888 @1%%888 @1%%888 @1%%888 @1%7-%888


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'art !Outstan!ing co""on shares

Ke'. 1/ Da 1/ Aug. 1/ No4. 1/Jeginning 'a#ance........................... -%/88 -%/88 -%/88 -%/88

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+ro'#e" 13/J (68 "inutes

'art ! Effect of inco"e taxes (!e'its or #osses in parentheses

+retax/ TaxEffect AfterTax

c. Cu"u#ati4e effect of change in accounting princip#e............@ 6%888 @ 11%/88 @ 3%/88

f.

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'art " Inco"e fro" !iscontinue! seg"ent

".

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'art !

Les*genera## accepte! accounting princip#es a##o) the accountingchange to 'e "a!e as #ong as the change can 'e :ustifie! as pro!ucing"ore usefu# financia# state"ents. Consistenc )ith other co"panies in thein!ustr is often a satisfactor :ustification.

'art 2 9ou'#e!ec#ining'a#ance !epreciation (Gate B 8


9epreciationExpense

LearEn!Joo& a#ue

883................................... @88%888 @ -8%888 @18%88888................................... 18%888 -%888 7%88888/................................... 7%888 -%-88 3%88Tota#................................. @1/6%-88

'art " Straight#ine !epreciation


9epreciationExpenseF

LearEn!Joo& a#ue

883................................... @88%888 @ 8%888 @168%88888................................... 168%888 8%888 18%88888/................................... 18%888 8%888 -8%888Tota#................................... @18%888

FAnnua# a"ount B (@88%888 @8 / ears B @-8%888

'art

+retax cu"u#ati4e effect of the accounting change(see 'oo&% part ...........................................................................@36%-88

Aftertax cu"u#ati4e effect of the accounting change(@36%-88 x P18./.........................................................................@7%688


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+ro'#e" 136J1Conclu$e$6

'art 5

The cu"u#ati4e effect shou#! 'e reporte! in the #o)er section of the inco"e

state"ent after an extraor!inar ite"s 'ut 'efore net inco"e. It )i## increaseinco"e 'ecause it resu#ts fro" a retroacti4e restate"ent of the asset to ahigher 'oo& 4a#ue.

'art 8

The 886 inco"e state"ent )i## report !epreciation expense of @8%888.This a"ount is the !epreciation expense using the straight#ine "etho!.

'art (

)ect o error on inancial statements

On the 886 inco"e state"ent% the pretax cu"u#ati4e effect of the changefro" !ou'#e!ec#ining'a#ance to straight#ine !epreciation of @36%-88 (fro"part ( #ess the 886 straight#ine !epreciation of @8%888 ie#!s a !ecrease toinco"e 'efore taxes of @3%88. Therefore% treating it as a change in anaccounting esti"ate (accounte! for in current an! future perio!s )ou#! resu#tin an un!erstate"ent of inco"e 'efore taxes ' @1-%88 (@1%688 F @3%88.This "eans net inco"e (aftertax )ou#! 'e un!erstate! ' @13%-88 Pco"pute!

as @1-%88 x (1 ./.

On the 886 'a#ance sheet% retaine! earnings )ou#! 'e un!erstate! '@13%-88% inco"e taxes paa'#e )ou#! 'e un!erstate! ' @%688 (@1-%88 x ./%an! assets )ou#! 'e un!erstate! ' @1-%88.

F Supporting co"putation9epreciation expense for 886$

If s)itching !epreciation "etho!s is treate! as a change in anaccounting esti"ate% then the straight#ine !epreciation a"ount isco"pute! an! reporte! in 886 as fo##o)s$

Joo& 4a#ue% Hanuar 1% 886.........................................................................@3%88

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+ro'#e" 137J (68 "inutes

'art ! Lear 883 )eighte!a4erage shares


SharesEffect of9i4i!en!

Kractionof Lear

=eighte!A4erage

HanuarHune....................18%888 x 1. x 61 B 6%888Hu#Septe"'er................ ,%888 x 1. x 31 B %788Octo'erNo4e"'er...........1%/88 x 1. x 1 B %/889ece"'er..........................1/%888 x 1.8 x 11 B 1%/8=eighte!a4erage shares outstan!ing 1%/8

'art 2 Lear 883 earnings per share co"ponents

Geporte!Tota#

9i4i!e!' Shares

Earningsper Share

Inco"e fro" continuing operations......... @ ,8%888 1%/8 @7.3

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'art 5 Lear 88/ )eighte!a4erage shares


SharesEffect

of Sp#itKractionof Lear

=eighte!A4erage

HanuarHune.................... 17%/88 x x 61 B 17%/88Hu#Septe"'er................ 8%/88 x x 31 B 18%/8Octo'er.............................. 1-%7/8 x x 11 B 3%1/No4e"'er9ece"'er....... 37%/88 x 1 x 1 B 6%/8=eighte!a4erage shares outstan!ing 37%1/

'art 8 Lear 88/ earnings per share co"ponents

Geporte!

Tota#

9i4i!e!

' Shares

Earnings

per ShareInco"e fro" continuing operations......... @138%888 37%1/ @3./8Extraor!inar #oss...................................... (37%1/37%1/ (1 .88Net inco"e.................................................. @ ,%-7/ 37%1/ @ ./8

'art (

Of the three earnings per share figures in part 6% inco"e fro" continuingoperations is "ost #i&e# the 'est pre!ictor of 886 resu#ts. =e "ight a#so

)ant to factor in an tren! in earnings per share (a!:uste! for the stoc& sp#it.J !efinition% the 88/ extraor!inar #oss is 'oth unusua# an! infre5uent an!therefore extre"e# un#i&e# to occur again in 886. o)e4er% the nature of theextraor!inar #oss nee!s to 'e consi!ere!% an! its i"pact on future operationsnee!s to 'e e4a#uate!. Kor exa"p#e% if the extraor!inar #oss )as !ue to a firethat occurre! in 9ece"'er that !a"age! the p#ant% then pro!uction )ou#!"ost #i&e# 'e i"paire! in 886% resu#ting in a !ecrease in inco"e fro"continuing operations.


#un$amental %ccountin& 'rinciples, !(t)$ition

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+ro'#e" 13-J (8 "inutes

1. Dar&et price B @/ per share (current stoc& exchange price gi4en

. Co"putation of stoc& par 4a#ues+referre!$ +ai!in a"ount Nu"'er of shares B @1-7%/88 1%/88 B @1/

Co""on$ +ai!in a"ount Nu"'er of shares B @/8%888 1-%888 B @ /

3. Joo& 4a#ues )ith no !i4i!en!s in arrears

Joo& 4a#ue per preferre! share B par 4a#ue ()hen not ca##a'#eB @1/

Co""on stoc& Tota# e5uit................................................ @1%88%888

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+ro'#e" 13-J 1Conclu$e$6

/. Joo& 4a#ues )ith ca## price an! t)o ears2 !i4i!en!s in arrears

+referre! stoc& +referre! stoc& ca## price (1%/88 x @18 @ 18%888

+#us t)o ears2 !i4i!en!s in arrearsF........... 38%888 +referre! e5uit.............................................. @ 8%888

F ears2 !i4i!en!s B x (@1-7%/88 x - B @38%888

Nu"'er of outstan!ing shares..................... 1%/88

Joo& 4a#ue per preferre! share.................... @ 168.88 (@8%888 1%/88

Co""on stoc& Tota# e5uit...................................................... @1%88%888

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SEGIA< +GOJa Jreeze% Capita#........................................................18%888 Co""on Stoc&% @1 +ar a#ue.................................. 18%888

)can&e$ capital or !0,000 sares o ! par*alue common stoc+ 1!0,000 !6.

Apr. 1 >a Jreeze% Capita#........................................................11,%83 Contri'ute! Capita# in Excess of +ar

a#ue% Co""on Stoc&....................................11,%83

/ranser remainin& capital to contribute$ capital

in ecess o par.Note$ An Apri# 1 co"poun! entr is accepta'#e.

'art 2 Corporate Ja#ance Sheet*E5uit Section On#

SUCCESS SLSTEDS% INC.Ja#ance SheetApri# 1% 88/

E5uitCo""on stoc&*@1 par 4a#ue% /%888 shares authorize!% 18%888 shares issue! an! outstan!ing........................................ @ 18%888Contri'ute! capita# in excess of par 4a#ue% co""on stoc&......... 11,%83

Tota# e5uit........................................................................................ @1,%83


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Geporting in Action * JTN 131

1. No. The 'a#ance sheet sho)s that 18%888 shares of no par 4a#ue%preferre! stoc& has 'een authorize!% ho)e4er% none ha4e 'een issue!.

. As of Ke'ruar % 883% the nu"'er of shares of co""on stoc& issue!an! outstan!ing are /6%,/ (in thousan!s% see 'a#ance sheet. As ofKe'ruar 3% 88% the nu"'er of shares of co""on stoc& issue! is/%71.

The )eighte! a4erage co""on shares use! in ca#cu#ating earnings pershare can 'e foun! un!er >risp >re"e2s Se#ecte! Kinancia# 9ataV.Kor 883% the )eighte! a4erage co""on shares use! )ere //%8,3 an!for 88 )ere /3%783. Therefore% for 'oth ears% the shares outstan!ingat earen! )ere s#ight# higher than the a4erage shares outstan!ing!uring the ear.

3. Tota# stoc&ho#!ers2 e5uit as of Ke'ruar % 883........... @73%3/%888

Joo& 4a#ue of e5uit app#ica'#e to co""on stoc&F........ @73%3/%888

F ;i4en that there is on# one c#ass of stoc&% a## the e5uit ite"s #iste! can 'e consi!ere! torepresent the 'oo& 4a#ue of the co""on stoc&.

. >risp >re"e has not pai! cash !i4i!en!s on its co""on shares since881 see its state"ent of cash f#o)s.

/. >risp >re"e2s inco"e state"ent reports the fo##o)ing$

883 88 881Jasic earnings per co""on share.............. @8.61 @8., @8.38

Its 'asic earnings per co""on share figure is has consistent# gro)no4er this 3ear perio!. Doreo4er% the 883 a"ount is consi!era'##arger than the prior t)o ears.

6. >risp >re"e2s conso#i!ate! 'a#ance sheet !oes not #ist an shares oftreasur stoc& in 883 or 88.

7. No extraor!inar gains or #osses% nor changes in accounting princip#e%are reporte! for either 883 or 88 (see its inco"e state"ent. A#so% nogains or #osses on the !isposa# of a 'usiness seg"ent are reporte! foreither ear.

-. Ans)er !epen!s on the financia# state"ent infor"ation o'taine!.



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Co"parati4e Ana#sis * JTN 13

1. Joo& 4a#ue per co""on share B

>risp >re"e2s 'oo& 4a#ue per co""on share$B @73%3/ //%8,3 B @.,6

Tast&a&e2s 'oo& 4a#ue per co""on share$B @7%// -%87/ B @ /.-,

. Earnings per share B

>risp >re"e earnings per share$ @33%7- //%8,3 B @8.61

Tast&a&e earnings per share$ @%888F -%87/ B @8./

F Exc#u!ing restructuring charge. If the net #oss sho)n on the inco"e state"ent is use!then earnings per share is @(8./.

3. 9i4i!en! Lie#! B

>risp >re"e !i4i!en! ie#! B @8 38.1 B 8.88

Tast&a&e !i4i!en! ie#! B @8.- @,.8 B /.

Ana#sis$ The #o) !i4i!en! ie#! for >risp >re"e suggests that it is agro)th stoc&.V

. +riceearnings ratio B

>risp >re"e priceearnings ratio$ @38.1 @8.61 B /8

Tast&a&e priceearnings ratio$ @,.8 @ 8./ B 37

Interpretation$ The priceearnings ratios of the co"panies areconsi!era'# !ifferent. In >risp >re"e2s case% the "ar&et appears)i##ing to pa a "u#tip#e of /8 ti"es its earnings. Kor Tast&a&e% that"u#tip#e is consi!era'# #ess at 37 ti"es its earnings.


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Ethics Cha##enge * JTN 133

The au!itor2s pri"ar responsi'i#it is to !eter"ine )hether the financia#state"ents are fair# state! in a## "ateria# respects. The au!itor in thissituation "ust !eci!e if the inco"e state"ent )ou#! 'e "ateria##

"isstate! (or #ess usefu# ' sho)ing a @/6%888 increase in net inco"e !ueto the change fro" the !ou'#e!ec#ining'a#ance "etho! of !epreciation tothe straight#ine "etho!.

Notice that )ith the cu"u#ati4e effect of the change% the net inco"e is@1%%388. =ithout the change% the net inco"e is @1%16-%388. The ratio of@/6%888@1%16-%388 represents a change of c#ose to /. This "agnitu!e of!ifference resu#ts in the nee! for the au!itor to "a&e a :u!g"ent ca##.+erhaps the !ifference is not so "ateria# that it )ou#! affect the !ecisionsof so"e users re#ing on the infor"ation presente! in the inco"e

state"ent. Other users% ho)e4er% "a 4ie) @/6%888 as a "ateria# a"ount.

The au!itor "ust a#so consi!er )hether genera## accepte! accountingprincip#es are 'eing fo##o)e!. ;enera## accepte! accounting princip#esa##o) a change in accounting "etho! if the ne) "etho! )i## present resu#tsin a "ore usefu# fashion. In this particu#ar case it !oes not appear that thechange )ou#! i"pro4e the financia# reporting. The e5uip"ent in 5uestionis of a hightech nature% )hich often i"p#ies that it shou#! 'e !epreciate!using an acce#erate! "etho! a##o)ing "ost of the !epreciation to 'e ta&enear# in the asset2s usefu# #ife.

Danage"ent2s !ecision to change a#so see"s to 'e re#ate! to securing ahigher 'onus. The @/6%888 o'4ious# represents a "ateria# a"ount to the"anagers of the co"pan% or the )ou#! not ha4e suggeste! the change.;i4en these consi!erations it see"s as though the au!itor shou#! as&"anage"ent to not change the "etho! of app#ing !epreciation. At a"ini"u"% "anage"ent "ust 'e re5uire! to fu## exp#ain the rationa#e forthis change.

Co""unicating in +ractice * JTN 13

There is no set so#ution to this acti4it. So#utions )i## 4ar 'ase! on thein!ustr an! the co"panies se#ecte!.



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Ta&ing It to the Net * JTN 13/

1. The 'a#ance sheet of CA% Inc.% sho)s that the co"pan has on#issue! co""on stoc&. o)e4er% the co""on stoc& is !i4i!e! into4oting an! non4oting shares. In 88 there )ere ,3%176%888 4oting

shares an! 1%888%888 non4oting shares outstan!ing.

. Joth the 4oting an! non4oting co""on shares ha4e a par 4a#ue [email protected].

3. The state"ent of cash f#o)s (financing sho)s that in 88 CA issue!co""on stoc& for procee!s of @67 "i##ion.

. In 88% the state"ent of cash f#o)s (financing sho)s that CArepurchase! co""on stoc& shares for @- "i##ion.

/. In 88% the state"ent of cash f#o)s (financing sho)s that CA pai!cash !i4i!en!s of @8 "i##ion.

Tea")or& in Action * JTN 136

1. The tea" state"ent shou#! inc#u!e the fo##o)ing$a. =hen a corporation 'us 'ac&V its stoc& (engages in a treasur

stoc& ac5uisition% the effect on financia# position is a !ecrease in'oth assets (cash an! e5uit (treasur stoc&. A#so% treasur stoc&

is a contra e5uit account that !ecreases e5uit.'. Geasons for 'u'ac&sV$ to use shares to ac5uire another corporation.

to a4oi! a hosti#e ta&eo4er ' an in4estor see&ing to ta&e contro#of the co"pan.

to reissue shares to e"p#oees as co"pensation.

to "aintain a strong or sta'#e "ar&et for the stoc&.

. The tea" shou#! esta'#ish the ac5uisition entr as fo##o)s$

Treasur Stoc&% Co""on......................................... 13%88 Cash..................................................................... 13%88 7eac

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Tea")or& in Action 1Conclu$e$6

The $ierences in reissue entries a through e are$(' Geissuing a'o4e cost creates a!!itiona# Contri'ute! Capita#.F(c Geissuing 'e#o) cost re!uces existing Contri'ute! Capita#.F

(! Geissuing 'e#o) cost re!uces existing Contri'ute! Capita#%F'ut after this account2s 'a#ance has 'een e#i"inate!% thenGetaine! Earnings "ust 'e re!uce! ' the a!!itiona# a"ount 'e#o)cost.

(e Geissuing 'e#o) cost re!uces Getaine! Earnings )hen Contri'ute!Capita#F !oes not exist.

FGefers to the Contri'ute! Capita#% Treasur Stoc& account.

=usiness >ee+ Acti4it * JTN 137

1. Startup tech co"panies usua## ha4e #i"ite! cash. Dost s"a## techco"panies argue that the are 'etter off pouring their cash intoresearch an! !e4e#op"ent or other in4est"ents )hi#e a#so retaining acushion for an sharp !o)nturns the in!ustr "ight encounter.

. The "ost pro"inent #arge tech co"panies !o not pa cash !i4i!en!s.

3. A recent po## of /88 institutiona# in4estors sho)e! that in4estors )erec#ear# in fa4or of recei4ing !i4i!en!s if the tax #a) changes so that!istri'ute! !i4i!en!s )i## not 'e taxe! as part of the shareho#!erpersona# inco"e.

. In the past% tech co"panies ha4e often purchase! treasur shares(stoc& 'u'ac&s )ith their excess cash. The share 'u'ac&s ha4e'een popu#ar )ith tech co"panies in the past 'ecause treasur stoc&re!uces shares outstan!ing. Stoc& options% )hich are high# uti#ize! 'tech co"panies% )i## u#ti"ate# resu#t in shares 'eing issue!. The techco"panies can "anage the tota# nu"'er of shares outstan!ing '

'a#ancing stoc& issue! !ue to stoc& options )ith share repurchases.

/. CEOs of tech co"panies ten! to ho#! consi!era'#e a"ounts of theirco"pans2 stoc&s. Therefore% the persona# (cash )ea#th of CEOs "agro) su'stantia## if tech co"panies start to issue "ore !i4i!en!s.


Solutions Manual, Capter !" 5"

8/10/2019 13 solution

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Entrepreneuria# 9ecision * JTN 13-

1. +#an A +#an J

Net inco"e.............................................................. @ /%888 @ /%888

8/10/2019 13 solution

55/55

itting the Goa! * JTN 13,

There is no for"a# so#ution for this fie#! acti4it. Stu!ents often fin! thisassign"ent interesting as it high#ights the re#e4ance of their accounting

stu!ies.

;#o'a# 9ecision * JTN 1318

1. Earnings per share

88 881 888

@8.-3 @1./ @1.3,

The tren! in earnings per share is a negati4e one% sho)ing !ecreasesfor the past t)o ears.

. =eighte! A4erage Shares Outstan!ing (!isc#ose! at the 'otto" of theInco"e State"ent

88 881

1%17/%-1%888 1%31%6%888

=eighte! a4erage nu"'er of shares outstan!ing has !ecrease!.

3. Cash !i4i!en!s !ec#are! for shareho#!ers (see State"ent of Kinancia#+osition (financing

88 881

@383%-8 @-6%1-

Cash !i4i!en!s pai! to shareho#!ers has increase!.

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13 solution