Chapter 13, Problem P13.53CT

To determine

Issuance of Stock:

A company issues common or preferred stock to collect the required amount of capital. Journal entry is made at the time of issuing the stock and receiving cash.

Cash dividend:

The Cash dividend is the amount of dividend paid to shareholders in cash. The Cash dividend is declared first and paid later. There are two journal entries made, one at the time of declaration of dividend and another at the time of payment.

Stock Dividend:

The Stock dividend is the number of shares given as dividend to the shareholders. The Stock dividend is declared first and shares are issued later. There are two journal entries made, one at the time of declaration of stock dividend and another at the time of issuance of shares.

Retained earnings:

The retained earnings are the accumulation of profits not distributed. It is part of the stockholder’s equity.

Stockholders’ Equity:

Stockholders Equity represents the amount owed to the shareholders by the Company. It included the amount of common stock issued and retained earnings.

Earnings per share:

The Earnings per share is the amount of net income earned by each common share outstanding. The Earnings per share calculated by with help of following formula:

$\text{Earnings per share=}\frac{\text{Net Income - Preferred Dividend}}{\text{Number of Common Shares Outstanding}}$

Price Earnings Ratio:

The price earnings ratio shows the relationship between price of the share and earnings per share. It is calculated with the help of following formula:

$\text{Price Earnings Ratio=}\frac{\text{Market price per share}}{\text{Earnings per share}}$

1. Journalizing the transactions:

To indicate:

The journal entries for the transactions given

To determine

2. Stockholders Equity Section of the balance sheet:

To indicate: The Stockholders Equity Section of the balance sheet as on Dec. 31, 2018

To determine

3. Earnings per share:

To determine:

The Earnings per share for the year 2018

To determine

4. Price Earnings Ratio:

To determine:

The Price Earnings Ratio for the year 2018 is 1.50 Times.