Dunne Corporation had the following stockholders’ equity amounts on January 1, 2021: Preferred Stock, 5%, $40 par, 30,000 shares authorized, 10,000 shares issued and outstanding, callable, nonparticipating $400,000 Paid in Capital in Excess of Par – Preferred Common Stock, $10 par, 2,000,000 shares authorized, 250,000 shares issued and outstanding 10,000 2,500,000 Paid in Capital in Excess of Par – Common Retained Earnings 7,000,000 _ 6,000,000 Total Stockholders’ Equity $15,910,000 Dunne completed the following chronological transactions during 2021, 2022, and 2023: a. On January 1, 2021, granted the company president 3,000 stock options. The option allows the president to buy common shares at $30 per share during 2022. These options have a total fair value of $75,000 and are to be considered compensation for two years (2021 and 2022). b. Declared and paid a cash dividend to satisfy the preferred stockholders. c. Paid the cash dividend in part “b." d. On August 1, 2021, Dunne purchased 15,000 shares of the company's own common stock for $54 per share in cash with the intention of reselling them. e. On November 1, 2021, Dunne declared a 2% stock dividend for the common stockholders when the common stock was selling for $55 per share. f. At the end of 2021, made the adjusting entry for the stock options in part “a." The common stock was now selling for $56 per share. g. At the end of 2022, made the adjusting entry for the stock options in part “a." The common stock was now selling for $58 per share. h. Early in 2023, the president exercised 2,000 of the stock options when the common stock was selling for $59 per share. INSTRUCTIONS: 1. Prepare journal entries for the above events. 2. Calculate basic earnings per share for 2021 assuming Dunne earned $900,000 of net income and had no weird items.
Dunne Corporation had the following stockholders’ equity amounts on January 1, 2021: Preferred Stock, 5%, $40 par, 30,000 shares authorized, 10,000 shares issued and outstanding, callable, nonparticipating $400,000 Paid in Capital in Excess of Par – Preferred Common Stock, $10 par, 2,000,000 shares authorized, 250,000 shares issued and outstanding 10,000 2,500,000 Paid in Capital in Excess of Par – Common Retained Earnings 7,000,000 _ 6,000,000 Total Stockholders’ Equity $15,910,000 Dunne completed the following chronological transactions during 2021, 2022, and 2023: a. On January 1, 2021, granted the company president 3,000 stock options. The option allows the president to buy common shares at $30 per share during 2022. These options have a total fair value of $75,000 and are to be considered compensation for two years (2021 and 2022). b. Declared and paid a cash dividend to satisfy the preferred stockholders. c. Paid the cash dividend in part “b." d. On August 1, 2021, Dunne purchased 15,000 shares of the company's own common stock for $54 per share in cash with the intention of reselling them. e. On November 1, 2021, Dunne declared a 2% stock dividend for the common stockholders when the common stock was selling for $55 per share. f. At the end of 2021, made the adjusting entry for the stock options in part “a." The common stock was now selling for $56 per share. g. At the end of 2022, made the adjusting entry for the stock options in part “a." The common stock was now selling for $58 per share. h. Early in 2023, the president exercised 2,000 of the stock options when the common stock was selling for $59 per share. INSTRUCTIONS: 1. Prepare journal entries for the above events. 2. Calculate basic earnings per share for 2021 assuming Dunne earned $900,000 of net income and had no weird items.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Dunne Corporation had the following stockholders' equity amounts on January 1, 2021:
Preferred Stock, 5%, $40 par, 30,000 shares authorized,
10,000 shares issued and outstanding, callable, nonparticipating
$400,000
Paid in Capital in Excess of Par – Preferred
10,000
Common Stock, $10 par, 2,000,000 shares authorized,
250,000 shares issued and outstanding
2,500,000
Paid in Capital in Excess of Par – Common
Retained Earnings
7,000,000
6,000,000
Total Stockholders’ Equity
$15,910,000
Dunne completed the following chronological transactions during 2021, 2022, and 2023:
a. On January 1, 2021, granted the company president 3,000 stock options. The option
allows the president to buy common shares at $30 per share during 2022. These options
have a total fair value of $75,000 and are to be considered compensation for two years
(2021 and 2022).
b. Declared and paid a cash dividend to satisfy the preferred stockholders.
c. Paid the cash dividend in part “b."
d. On August 1, 2021, Dunne purchased 15,000 shares of the company's own common
stock for $54 per share in cash with the intention of reselling them.
e. On November 1, 2021, Dunne declared a 2% stock dividend for the common
stockholders when the common stock was selling for $55 per share.
f. At the end of 2021, made the adjusting entry for the stock options in part "a." The
common stock was now selling for $56 per share.
g. At the end of 2022, made the adjusting entry for the stock options in part "a." The
common stock was now selling for $58 per share.
h. Early in 2023, the president exercised 2,000 of the stock options when the common stock
was selling for $59 per share.
INSTRUCTIONS:
1. Prepare journal entries for the above events.
2. Calculate basic earnings per share for 2021 assuming Dunne earned $900,000 of net
income and had no weird items.
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