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MGA 306 Financial Reporting and Analysis
MGA 306 Financial Reporting and Analysis
Please show calculations clearly for the following questions to receive partial credits.
1. True or False
T F 1. If Home Depot eventually becomes bankrupt, its preferred shareholders carry senior
positions as claimants in bankruptcy vis-à-vis common shareholders.
T F 2. Retained earnings and accumulated other comprehensive income (AOCI) can be found in
the contributed capital section of stockholders’ equity.
T F 3. A re-issuance of treasury stock at a price lower than what it was repurchased for results
in a loss on the income statement.
T F 4. Comprehensive income is a more inclusive notion of company performance because it
includes gains and losses that bypass net income but affect stockholders’ equity.
T F 5. Because diluted EPS include dilutive securities such as convertible securities and
employee stock options, it must always be less than or equal to basic EPS.
MGA 306 Financial Reporting and Analysis
- Following is the stockholders’ equity section of a recent balance sheet for Portlands, Inc.:
| Stockholders’ Equity: | |
| Common stock, $1.25 par value, authorized shares, – 400,000, issued shares – 241,764 | $ 302,205 |
| Capital in excess of par | 604,410 |
| Retained earnings | 5,840,053 |
| Accumulated other comprehensive loss | (100,304) |
| Common stock in treasury, at cost – 75,000 shares | (2,647,500) |
| Total stockholders’ equity | $ 3,998,864 |
- Show the computation to derive the $302,205 balance for the common stock account.
Ans: ___________________
2. What was the average issue price for the common shares issued?
Ans: ___________________
3. What was the average cost at which the treasury stock was purchased?
Ans: ___________________
4. In their 2015 10-K report, eBay reported a stock option grant of 2 million options during the year, the per share fair-value of which was computed as $6.84. If the options have, on average, a four-year vesting period.
5. What expense did the company report in 2015 related to this grant?
Ans: ___________________
6. What will happen to the following accounts when those options are exercised (please circle your answer):
Common stock Increase Decrease
Cash Increase Decrease
Basic EPS Increase Decrease
- The stockholders’ equity of Concord Inc. at December 31, 2013, appears below:
| Common stock, $15 par value, 200,000 shares authorized,135,000 shares issued and outstanding | 2,025,000 |
| Paid-in capital in excess of par value | 1,750,000 |
| Retained earnings | 2,375,000 |
During 2014, the following transactions occurred:
May 10: Declared and issued a 10% common stock dividend when market value was $40 per share
December 10: Declared a cash dividend of $2.50 per share to be paid in January 2015.
December 31: Recognized net income of $ 1,087,000.
1.Prepare the journal entry to record the stock dividend.
2. How much was the cash dividend paid?
Ans: ___________________
3. What was the ending balance of retained earnings on December 31, 2014?
Ans: ___________________
MGA 306 Financial Reporting and Analysis
