Taylor Corporation had the following stockholders’ equity balances in its general
Question # 00033653
Posted By:
Updated on: 11/27/2014 04:14 PM Due on: 12/12/2014
At the beginning of 2014, Taylor Corporation had the following stockholders’ equity balances in its general
ledger:
Common Stock, $10 Par Value $2,500,000
Paid-In Capital in Excess of Par 1,500,000
Pain-In Capital, Treasury Stock 450,000
Paid-In Capital, Stock Options 200,000
Retained Earnings 5,000,000
Treasury Stock (15,000 shares) (300,000)
Total Stockholders’ Equity $9,350,000
The paid-in capital from stock options relates to options granted on 1/1/12 to the CEO as incentive
compensation. As of 1/1/14, the remaining expected benefit period is four years; expense has been and
will be recorded evenly over the benefit period.
The following events were among the many occurring in 2014:
a. January 2: Purchased 5,000 shares of its common stock for $16 per share. Taylor uses the cost
method of accounting for treasury stock transactions.
b. February 1: Declared and paid a cash dividend of $2 per share on the outstanding common
stock.
c. April 1: Issued 20,000 shares of $50 par, noncumulative, convertible 6% preferred stock for $60
per share, where one share of preferred stock is convertible into three shares of common stock.
d. July 1: 2,000 shares of treasury stock that had been purchased in a prior year for $21 per share
were re-issued for $22 per share.
e. August 1: Holders of 8,000 shares of the preferred stock converted their shares into common
stock when the market value of the common stock was $22 per share. Taylor uses the book value
method of accounting for conversions.
f. October 1: Declared and distributed a 1% stock dividend on common stock outstanding when the
market price of the stock was $24 per share.
g. November 1: Corrected an error that was made several years ago, when land that had been
purchased for $100,000 was inadvertently expensed.
h. December 1: Declared and distributed a property dividend of land to preferred shareholders. The
land had a fair value of $60,000 and a carrying value of $75,000.
i. December 31: Recorded 2014 compensation expense related to the stock options.
The 2014 Final Net Income, including the effects of any net income items listed above (and the 2014 tax
effects on net income items), was $1,000,000. There were 500,000 shares authorized for both preferred
and common stock.
ledger:
Common Stock, $10 Par Value $2,500,000
Paid-In Capital in Excess of Par 1,500,000
Pain-In Capital, Treasury Stock 450,000
Paid-In Capital, Stock Options 200,000
Retained Earnings 5,000,000
Treasury Stock (15,000 shares) (300,000)
Total Stockholders’ Equity $9,350,000
The paid-in capital from stock options relates to options granted on 1/1/12 to the CEO as incentive
compensation. As of 1/1/14, the remaining expected benefit period is four years; expense has been and
will be recorded evenly over the benefit period.
The following events were among the many occurring in 2014:
a. January 2: Purchased 5,000 shares of its common stock for $16 per share. Taylor uses the cost
method of accounting for treasury stock transactions.
b. February 1: Declared and paid a cash dividend of $2 per share on the outstanding common
stock.
c. April 1: Issued 20,000 shares of $50 par, noncumulative, convertible 6% preferred stock for $60
per share, where one share of preferred stock is convertible into three shares of common stock.
d. July 1: 2,000 shares of treasury stock that had been purchased in a prior year for $21 per share
were re-issued for $22 per share.
e. August 1: Holders of 8,000 shares of the preferred stock converted their shares into common
stock when the market value of the common stock was $22 per share. Taylor uses the book value
method of accounting for conversions.
f. October 1: Declared and distributed a 1% stock dividend on common stock outstanding when the
market price of the stock was $24 per share.
g. November 1: Corrected an error that was made several years ago, when land that had been
purchased for $100,000 was inadvertently expensed.
h. December 1: Declared and distributed a property dividend of land to preferred shareholders. The
land had a fair value of $60,000 and a carrying value of $75,000.
i. December 31: Recorded 2014 compensation expense related to the stock options.
The 2014 Final Net Income, including the effects of any net income items listed above (and the 2014 tax
effects on net income items), was $1,000,000. There were 500,000 shares authorized for both preferred
and common stock.
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Rating:
/5
Solution: Taylor Corporation had the following stockholders’ equity balances in its general