At the end of the year, the records of NCIS Corporation provided the following selected and incomplete data:

At the end of the year, the records of NCIS Corporation provided the following selected and incomplete data:

Common stock (par $10); no changes in account during the year.

Shares authorized, 320,000.

Shares issued: _______  (all shares were issued at $19 per share. Total cash collected: $2,185,000.

Treasury stock: 3,000 shares (repurchased at $18 per share).

The treasury stock was acquired after a stock split was announced.

Net income, $225,120.

Dividends declared and paid: $126,560.

Retained earnings beginning balance: $675,000.

Required:

1. Complete the following tabulation:

2. What is the balance in the Additional Paid-in Capital account.


3. What is earnings per share (EPS).


4. What was the dividend paid per share.


5. Under what section should treasury stock be reported on the balance sheet? Also at what amount should it be shown?



6. Assume that the board of directors voted a 2-for-1 stock split. After the stock split, calculate the par value per share and the number of outstanding shares.


7. Assuming the stock split mentioned above, prepare any journal entry that should be made.


8. Disregard the stock split (assumed above). Assume instead that a 10 percent stock dividend was declared and issued (after treasury stock repurchase) when the market price of the common stock was $19. Prepare any journal entry that should be made.

Explanation:

1.

Shares issued: $2,185,000 ÷ $19 = 115,000

Shares outstanding: 115,000 – 3,000 = 112,000

2.

Additional paid-in capital: $2,185,000 – (115,000 shares issued × $10 par) = $1,035,000.

3.

Earnings per share: $225,120 ÷ 112,000 shares = $2.01 (rounded)

4.

Dividend per share: $126,560 ÷ 112,000 shares = $1.13.

5.

Treasury stock is listed as a negative amount in the stockholders’ equity section of the balance sheet. Amount: 3,000 shares × $18 cost = $54,000.

6.

After a 2-for-1 stock split, the par value per share will be cut in half: $10 ÷ 2 = $5.

The outstanding shares before split were 115,000 (above). After the split there will be 230,000 shares outstanding.

7.

Stock splits do not require a journal entry since no amounts on the balance sheet change. Details of the split would be reported in the footnotes.

8.

Retained earnings: 112,000 shares × 10% × $19 = $212,800

Common stock: 112,000 shares × 10% × $10 = $112,000

Additional paid-in capital (112,000 shares × 10%) × ($19 – $10) = $100,800

      
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